Tax Guide for US Expats Living and Working in Trinidad and Tobago
Who Is Liable For Income Taxes in Trinidad and Tobago
Individuals ordinarily resident in Trinidad and Tobago are subject to tax on their worldwide income. Individuals not ordinarily resident in Trinidad and Tobago are taxable on income accruing in or derived from Trinidad and Tobago and on foreign income remitted to or received in Trinidad and Tobago.
Individuals are considered resident in Trinidad and Tobago if they are physically present in Trinidad and Tobago for a period of more than six months in the income year. The concept of ordinary residence is expanded under common law jurisprudence and examines various factors that determine the individual’s habitual place of abode.
Income subject to tax. Taxable income is the aggregate of world-wide income from all specified sources after allowing for appropriate deductions and exemptions.
Employment income. Taxable income includes the value of employer-provided benefits, including accommodation, transportation and tax equalization.
Self-employment and business income. Taxable income consists of the aggregate amount of income from all sources, including self-employment and business income, after allowing the appropriate deductions.
Directors’ fees. Directors’ fees and amounts paid by a company for expenses to any of its directors are subject to tax.
Married persons are taxed separately, not jointly, on all types of income. No community property or other similar marital property regime applies.
Investment income. Dividends received from a resident company (other than preferred dividends) are exempt from tax. Interest received on bank deposits and certificates of deposit held at financial institutions in Trinidad and Tobago and interest on bonds and similar instruments are exempt from tax. Rental income and royalties are taxed as ordinary income.
For nonresidents, a final withholding tax is levied at source at a rate of 15% on interest, royalties and management fees. A final withholding tax is imposed at a rate of 5% on dividends paid to a parent company. For other dividends paid to nonresidents, the final withholding tax rate is 10%. These withholding tax rates may be modified or eliminated under the provisions of a tax treaty.
Capital gains. Long-term capital gains are not subject to tax. Any gain realized on the disposition of certain assets within 12 months after acquisition is taxable as ordinary income. Persons domiciled in Trinidad and Tobago are taxed on gains derived from sales of capital assets acquired and purchased within a 12-month period.
The following assets are exempt from tax:
- Currency acquired for personal expenditure abroad by the taxpayer or his or her family or dependents
- Sums obtained as compensation or damages for any wrong or injury suffered by an individual in his or her personal life or profession or vocation
- Winnings from legal gambling
The following gains are exempt from tax:
- Gains accruing on the disposal of any security in Trinidad and Tobago
- Gains accruing on the disposal of personal automobiles, household goods or owner-occupied houses if these assets are disposed of for TT$5,000 or less
- Gains that are specifically exempt from tax under the law
The following deductions are allowed:
- The cost (money or money’s worth) of an asset, together with other expenses incidental to acquisition
- Any expenditure incurred wholly and exclusively for enhancing the value of an asset (maintenance expenses are not allowable expenses)
- Costs incurred wholly and exclusively in disposing of an asset, including legal fees and agent’s fees
Taxation of employer-provided stock options and profit-sharing schemes. No specific provisions in Trinidad and Tobago regulate the taxation of employer-provided stock options. Therefore, the tax treatment is based on general principles and case law.
An option is taxed on its market value at the time of grant if the option gives the employee an irrevocable right to acquire shares at less than the current market value. An option is not taxed at the time it is exercised. Any gains derived from the subsequent sale of the shares acquired under the option are exempt from tax. If a vesting period must elapse before the employee obtains an irrevocable right to acquire shares, the taxing date is the date of vesting.
Specific provisions apply to profit-sharing schemes approved by the Board of Inland Revenue. An employer that establishes an employee share ownership plan (ESOP) must contribute at least 25% of the annual bonus distribution to the plan’s trustee for the purchase of company shares. When shares are granted to employees, the shares have already been purchased on behalf of the employees. Contributions by the employer to the plan are not considered income to the employee and are not taxable. Distributions received by an employee from the shares held in trust are not subject to tax. If the shares are transferred to an employee under either of two specified conditions, the market value of all the shares transferred is deemed to be income accruing to the beneficial owner of the shares on the date of transfer and is included in the income of the individual for that income year. The following are the specified conditions:
- The employee is still employed by the employer, and the shares are transferred after five years from the date of allocation of the shares.
- The employee ceases to be employed by the employer for a reason other than retirement or death, and the shares are transferred after the employment ends.
Deductions
Allowances and deductible expenses. The following table lists allowances and deductible expenses.
Expenses wholly, exclusively and necessarily incurred by an employee in the performance of his or her duties with respect to his or her employment is deductible for tax purposes to the extent that the expenses have not been reimbursed by the employer.
Business deductions. The following expenses incurred wholly and exclusively in the production of income are deductible:
— Rental of equipment, plant and machinery.
— Rental of buildings (must substantiate certain details).
— Rental of motor vehicles.
- Business entertainment: Only 75% of business meals and entertainment expenses may be deducted.
- Promotional expense allowance: This allowance provides for a deduction equal to 150% of the expenditure incurred with respect to the creation or expansion of foreign markets except those markets within the Caribbean Community and Common Market (CARICOM).
- Child care or homework facility: The actual expenditure incurred in setting up a child care or homework facility for dependents of employees is deductible up to a maximum of TT$500,000 per facility but not exceeding in aggregate TT$3 million.
Rates. For 2011, income tax is imposed at a flat rate of 25%.
Credits. Most tax credits have been replaced by the deductible personal allowance of TT$60,000 (see above).
Relief for losses. Business losses carried forward may be written off to the full extent of taxable business profits in the same tax year. The unrelieved balance may be carried forward indefinitely. No loss carrybacks are allowed.
B. Other taxes
Estate and gift taxes. No inheritance or estate tax is levied on a deceased person’s estate, and no tax is levied on gifts.
Business levy. Sole traders and self-employed persons engaged in a trade or business are subject to a business levy on gross sales or receipts (other than emolument income) at a rate of 0.20%. This levy applies only if gross sales or receipts exceed TT$200,000 for the income year. Any income tax paid may be credited against the individual’s business levy liability if the business levy liability is higher. An exemption applies for the first three years of the business.
C. Social security
Trinidad and Tobago has no social security program. A national insurance program provides pension, sickness and maternity benefits. The employers’ weekly required contributions for 2011 range from TT$11.52 for employees earning less than TT$866.99 per month to TT$137.88 for employees earning TT$8,300 or more per month. The employees’ weekly required contributions range from TT$5.76 to TT$68.94. Employees under 16 years of age, unpaid apprentices and per sons 60 years of age and older, as well as these individuals’ employers, are exempt from the national insurance contribution requirement.
The following health surcharge tax is levied on every employed person who makes, or is required to make, contributions under the National Insurance Act and on individuals, other than employed persons, who are required to file income tax returns.
Double tax relief and tax treaties
Unilateral relief. A credit is available to residents for foreign taxes paid on foreign-source income. The credit may not exceed Trinidad and Tobago tax payable on the underlying foreign-source income. A nonresident who proves to the satisfaction of the Board of Inland Revenue that he or she has paid, or is liable for, Caribbean Commonwealth income tax (see below) on Trinidad and Tobago income is entitled to double tax relief on foreign-source income at a rate determined under the following rules:
- If the appropriate Caribbean Commonwealth tax rate does not exceed the tax rate in Trinidad and Tobago, relief is given at one-half of the Caribbean Commonwealth rate of tax.
- If the appropriate Caribbean Commonwealth tax rate exceeds the Trinidad and Tobago rate, relief is given in the amount by which the Trinidad and Tobago rate exceeds one-half of the Caribbean Commonwealth tax rate.
Relief under double tax treaties. Trinidad and Tobago has entered into double tax treaties with the following countries.
Canada
India
Sweden
China
Italy
Switzerland
Denmark
Luxembourg
United Kingdom
France
Norway
United States
Germany
Spain
Venezuela
In addition, the treaty with the CARICOM states (Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia and St. Vincent) provides reduced rates of withholding tax.
To learn more about the history, culture, economy and other information about Trinidad and Tobago
We have been preparing US income tax returns for US Citizens and permanent residents living in Trinidad and Tobago for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Trinidad and Tobago and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Trinidad and Tobago.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a consultation by phone, skype or email