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Benefits of Trinidad and Tobago’s Tax System and Financial Stability

Mr. Carlton Thomas Business Analyst National Energy Corporation of Trinidad and Tobago
  • Financial Stability in Trinidad and Tobago

Trinidad & Tobago is a stable English-speaking democracy with a strong Energy sector, and is recognised as the region’s capital for Financial Services. It is strategically located as a prime commercial gateway between North and South America. Trinidad and Tobago is business friendly, agile and welcomes foreign investment.

As such, Trinidad and Tobago possesses a favourable tax system and a robust regulatory framework that can be beneficial to Chinese investors. Also, investors will be able to access fiscal incentives once all requirements are met, benefit from low utility costs and gain entrance  to the Americas marketplace.

Enablers include strong credit ratings that compare favourably across the region. In April 2015, Moody’s bestowed upon Trinidad and Tobago an investment grade of Baa2 based on a strong government balance sheet, moderate and affordable debt burden and strong external position. In December 2014, Standard & Poor’s Ratings Services (S&P) affirmed its ‘A/A-1’ long- and short-term (investment grade) sovereign credit ratings given to the country. Giving its rationale, S&P said: “T&T’s net external asset position, low external vulnerability and stable political system support the ratings.

Our financial system which accounts for 12 per cent of GDP, is well-organised, soundly-regulated and plays a pivotal role in the economy. The Central Bank of Trinidad & Tobago operates independently of Government in determining monetary policy and setting discount rates and reserve requirements. It regulates operations of the commercial banks and other financial institutions.

  • Trinidad and Tobago Tax System

The principal taxes in Trinidad and Tobago are income tax, corporation tax, business levy, various petroleum taxes, value added tax (VAT), withholding tax and customs and excise duties. There are no restrictions on repatriation of capital, profits, dividends, interest, distributions or gains on Investment.

Corporate Tax Rates

Chinese companies stand to benefit from a stable tax rate. Corporation tax is charged at a rate of 25% on chargeable profits and short term capital gains for companies in the downstream energy-based manufacturing sub-sector and other types manufacturing concerns.

A rate of 35% is applied for companies engaged in liquefaction of natural gas, manufacture of petrochemicals, transmission and distribution of natural gas and wholesale marketing and distribution of petroleum products. It is important to also note that petroleum companies involved in production and refining operations in Trinidad and Tobago operate under a separate tax regime.

Business Levy

Business levy at the rate of 0.6% is charged yearly on the gross income of a company The company is entitled to a tax credit against its business levy liability for a year of income of any payment made in respect of its corporation tax liability for that year up to a maximum of its business levy liability.

Green Fund Levy

Green Fund Levy is charged at the rate of 0.3% of the company’s gross income, that is, all income received in the ordinary course of business before allowing any deductions for business expenses.

Tax Treatment of Losses

For corporation tax purposes, a company's ordinary trading losses may be carried forward and set off against the first available future profits (excluding short-term capital gains), without time limit. Losses may not be carried back.

  • Fiscal Incentives Available to Chinese Investors

The government’s economic policy is geared towards the development of a robust and open market-driven economy. The Government has made a commitment to actively encourage foreign investment in Trinidad & Tobago. As such legislation removing restrictions on foreign investment and providing various incentives to investors has been enacted.

Various forms of tax relief and other incentives may be applied for and obtained under the Trinidad and Tobago Free Zones Act, Chap. 81:07 and under the Fiscal Incentives Act, Chap. 85:01. Both statutes require that certain pre-requisites be satisfied before a company can become eligible for the tax relief benefits being offered.

The Incentive Regime is comprised of:

  • Fiscal Exemptions
  • Import Duty Concessions
  • Research and Development Facility
  • Free Zones

Cost Benefits and Incentives

Free Trade Zone

The country has comparable incentives to other regional locations. Chinese investors can benefit from being located in a free zone where they are exempted from customs duties, value added tax and income tax on dividends for an indefinite period. There is 100% ownership of locally registered companies; there are no foreign exchange controls, and companies can enjoy full repatriation of funds. Incentives for staff training will also be considered based on the specific needs of the operator.

Market Access

Trinidad and Tobago provides access to an extended market of over 700 million people through bilateral trade agreements with Venezuela, Colombia, the Dominican Republic, Costa Rica, France, USA, Canada, and Cuba, Europe.

The country also participates in a trade programme known collectively as the Caribbean Basin Initiative (CBI), which is a vital element of the United States economic relations with its neighbours in Central America and the Caribbean.

Cost Effectiveness

Trinidad and Tobago has been ranked 1st for cost effectiveness in Central America and the Caribbean. Electricity rates within Trinidad & Tobago start as low as US$0.03/KWh offering Chinese investors access to some of the lowest electricity tariffs in the Western Hemisphere, and significantly lower than average rates in China.

Low Operational Costs

Based on a cost comparison by FDI Benchmarks (A service of Financial Times Limited 2015) Trinidad and Tobago is the second cheapest location within the Caribbean and Latin American regions when the costs of electricity, water, telecoms and natural gas are compared.

Fiscal Incentives

Under the Fiscal Incentives Act Chapter 85:01 large scale manufacturing including petrochemicals and inorganic chemicals or processing companies established in Trinidad and Tobago can receive an exemption from paying customs duties, Value Added Tax on the costs related to the production of approved products and or services.

Import Duty Concessions

Manufacturing enterprises are allowed duty free treatment on their raw materials, machinery and equipment and in some cases packaging material based upon the provisions of the country’s Customs Act.

Profit Remittance and Capital Repatriation

There are no restrictions on repatriation of capital, profits, dividends, interest, distributions or gains on investment. Repatriation may be effected through the commercial banking sector. There remains the liability to pay withholding tax, where applicable.

Allowances for Capital Costs

All companies carrying on a trade, business, or profession are entitled to annual wear and tear allowances on their machinery and equipment, calculated according to the declining-balance method. In the first year, the initial and annual allowances are calculated on cost. Thereafter, annual allowances are calculated on the balance of cost after deducting the allowances previously granted.

Accelerated tax depreciation is allowed to manufacturers in the form of an initial allowance at the rate of 90% on capital expenditure on plant and machinery. For those companies engaged in the production of petrochemicals, or enjoying concessions under the Fiscal Incentives Act, the rate is 20%.

A - Buildings and Improvements

B - Plant and machinery, motor vehicles, furniture

C - Heavy equipment, trucks, computer equipment

D - Aircraft and Extra Heavy Equipment

Foreign Ownership

The Foreign Investment Act provides for the acquisition by foreign investors of an interest in land or shares in local private or public companies and for the formation of companies by foreign investors.  In summary, the Foreign Investment Act, 1990 makes the following provisions:

  • A foreign investor is permitted to own 100% of the share capital in a private company, but prior to the investment the Minister of Finance must be notified.
  • Foreign investors are permitted to own up to 30% in total of the share capital of a local public company without a licence.
  • A licence is required to permit foreign investors to own more than 30% in total of the share capital of a public company.
  • A foreign investor may acquire interest in land for business purposes up to five acres without having to acquire a licence. For any further acreage in excess of the five acre limit, a license must be acquired from the Minister of Finance prior to acquiring such acreage.

By locating operations in Trinidad and Tobago, Chinese investors will be able to access a suite of fiscal incentives. Additionally, you can have confidence in knowing that Trinidad and Tobago possesses a strong financial system, comparatively low operating costs, market access to the 700 million plus people that make up North and South America region and that your investments are welcomed and respected.

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