Ask a company director in Trinidad what rate of tax the business pays and most will say thirty percent. It is a reasonable answer and an incomplete one. A company here faces three separate charges, calculated on two entirely different bases, and understanding the interaction between them is the difference between a tax provision that holds and one that produces an unpleasant surprise.
Corporation tax: charged on profit
Corporation tax is charged at 25% on the first TT$1,000,000 of chargeable profits and 30% on the excess. Certain classes of company — petroleum operations and some regulated sectors among them — are taxed under different regimes with materially higher rates.
"Chargeable profits" is not your accounting profit. It is accounting profit adjusted for tax purposes:
- Add back expenses that are not deductible for tax — depreciation, entertainment, fines and penalties, general provisions, and expenditure not incurred wholly and exclusively in producing income.
- Deduct capital allowances (the tax system's own version of depreciation, at prescribed rates by asset class).
- Deduct allowable losses brought forward from prior years.
- Adjust for any specific incentives or allowances the company qualifies for.
The gap between accounting profit and chargeable profit is frequently large. A company that has invested heavily in equipment may show healthy book profit and low chargeable profit; a company with significant entertainment or non-deductible spending can show the reverse.
Business levy: charged on gross revenue
Business levy is 0.6% of gross revenue or receipts. Its purpose is to ensure that a company with substantial turnover contributes something even in a year with little or no taxable profit.
The mechanism is important: business levy is payable to the extent that it exceeds the corporation tax liability. It is not an additional charge on top of a full corporation tax bill — it is a floor. If corporation tax for the year exceeds 0.6% of gross revenue, no business levy is due. If corporation tax is small or nil, business levy fills the gap.
Exemptions apply, including for companies whose annual turnover falls below TT$360,000 and for certain categories of company. New businesses are generally not liable in the first three years of the business activity.
Green fund levy: charged on gross income, regardless
The green fund levy is 0.3% of gross income, payable quarterly by companies and partnerships doing business in Trinidad and Tobago. It funds the National Environmental Fund.
Three features make it the levy that catches people out:
- It is charged on gross income, not profit.
- It is not deductible in computing chargeable income.
- It is not creditable against corporation tax.
Put plainly: a company that makes a loss still pays green fund levy. A company that pays full corporation tax pays green fund levy on top. There is no offset and no relief. On TT$3 million of gross income it is TT$9,000 a year — payable whether the year was good or catastrophic.
Working an example
Take a trading company with gross revenue of TT$4,000,000 and chargeable profits of TT$300,000.
- Corporation tax: 25% × TT$300,000 = TT$75,000
- Business levy test: 0.6% × TT$4,000,000 = TT$24,000. Corporation tax of TT$75,000 exceeds this, so no business levy is payable.
- Green fund levy: 0.3% × TT$4,000,000 = TT$12,000. Payable regardless.
- Total: TT$87,000.
Now assume the same revenue but a bad year — chargeable profits of nil.
- Corporation tax: nil
- Business levy: 0.6% × TT$4,000,000 = TT$24,000, now payable in full
- Green fund levy: TT$12,000
- Total: TT$36,000 in a year with no profit.
That second scenario is the one to plan for. A high-turnover, low-margin business — distribution, construction, retail — can face a five-figure tax bill in a year it lost money. If that possibility is not in your cash flow forecast, it should be.
Quarterly instalments
Companies pay corporation tax by quarterly instalments due 31 March, 30 June, 30 September and 31 December, based on the prior year's liability, with any balance settled when the return is filed. Green fund levy and business levy follow quarterly patterns as well.
Underestimating instalments attracts interest. Overpaying ties up cash you may need. Getting the estimate right requires management accounts that are current — another reason monthly bookkeeping earns its keep.
Three planning points worth raising with your accountant
- Capital allowances. Timing an equipment purchase before rather than after year end can shift a full year's allowance.
- Loss relief. Losses carried forward have real value. They need to be properly computed, claimed and tracked — they are frequently lost through poor record keeping rather than through law.
- Incentives. Approved allowances exist for particular sectors and activities. They are underclaimed largely because owners do not know they exist.
The point to hold on to
Two of the three charges on a T&T company are calculated on gross income. Profitability protects you from one of them and not at all from the other. Budget for tax as a function of turnover, not just of profit, and the bad year will be survivable.
General information only. This article sets out general information about accounting, taxation and insurance matters in Trinidad and Tobago as understood at the date of publication. Rates, thresholds, forms and filing procedures change, and the right treatment depends on your particular circumstances. It is not accounting, tax, legal or financial advice and should not be relied on as a substitute for professional consultation. Please confirm current requirements with the Inland Revenue Division, the National Insurance Board, your insurer or regulator as applicable — or speak with us before acting.