Trinidad And Tobago Enhances Tax Breaks

by Phillip Morton, Investors Offshore.com

14 September 2010

The Trinidad and Tobago government on September 8 announced a number of fiscal measures as part of its 2010/11 budget, aimed at enhancing opportunities for prospective investors.

In particular, the budget announced an expansion to the Free Trade Zones regime, introduced incentives for certain industries, and proposed an overhaul to the islands' revenue authority, which is to include the launch of a generous tax amnesty.

The budget removes the condition that limits projects worth more than USD50m from availing of the tax exemptions offered under the territory’s Free Trade Zones. From January 1, 2010, smaller scale investments in the free zones will qualify for exemption from customs duties on capital goods, parts and raw materials for use in the building and equipping of premises as well as exemptions on import and export duties and associated taxes, and licensing requirements.

The government has also proposed a comprehensive overhaul of the energy tax regime. This includes reducing the rate levied on profits from petroleum exploration and extraction, from 50% to 35%. The tax burden on mature and small oil fields, under the supplemental petroleum tax, will also fall 20% the government has said. These changes will be effective also from January 1, 2011.

The budget also announces incentives with respect to the alternative energy industry, including ‘wear and tear’ allowances for projects relating to compressed natural gas, solar water heating and wind energy. In addition, accelerated depreciation allowances have been extended to the maritime and recycling sectors. In addition to the depreciation allowances, the government has announced a number of other exemptions for the aforementioned alternative energy industries. Depending on the type of energy source, the government is offering VAT exemptions, and exemption from customs duties on inputs, and is to offer incentives to encourage the purchase of environmentally-friendly energy products by individuals and businesses.

Under the budget, it has also been announced that the revenue authority’s working practices will be reformed, and a tax amnesty will be launched. This will allow taxpayers with outstanding tax balances predating 2009 to settle their tax arrears and have penalties and interest waived. The amnesty would then be followed by a crackdown on non-compliance, the government said.

The government has also announced a number of real estate measures, including rescinding plans to introduce a new Property Tax system, by reintroducing the Lands and Buildings Taxes regime, at the lower 'old rates and values’, the government said. In addition, a new homeowner tax credit worth TTD18,000 (USD2,850) is proposed to be introduced, to be offset against mortgage interest paid in the first five years of ownership.

Lastly, the budget clarifies the tax treatment of funds withdrawn early from Employee Share Ownership Plans, the government underscoring that income tax at 25% should be paid on the balance. Until 2006, a rate of between 5 and 25% had been paid.

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