The Government’s economic policy is directed to the development of a robust and open market-driven economy. It is committed to actively encouraging foreign investment in Trinidad & Tobago. Apart from enacting legislation to remove restrictions on foreign investment and to remove foreign exchange control, the Government has also made a wide range of fiscal incentives available to the foreign investor. They generally take the form of import duty concessions or other tax allowances.
In this Chapter, Angelique Bart, Partner; and Rodrick Edinboro, Associate in Hamel-Smith’s Transactional Department, offer investors an overview of the type of incentives which are available to encourage investment.
Oil and Gas resources have been the mainstay of the country’s economy for a long time. Recognizing that such resources are finite, in recent years the Government has sought to create an investment climate that attracts higher value investments, especially in the downstream energy and non-energy sectors. As a result, certain incentives and concessions apply to specific industry sectors while others apply across the board.
Under the Corporation Tax Act, tax credits are available to special classes of companies as set out in the following paragraphs:
REGIONAL DEVELOPMENT AREA
An approved company carrying on business in a regional development area is entitled to a tax credit equal to twenty-five percent (25%) of the chargeable profits for a period of seven (7) years from January 1 in the year in which the certificate of approval is issued. To qualify, the company must:
A company which satisfies the criteria may apply in writing to the Minister of Finance. A listing of the Regional Development Areas is available.
APPROVED PROPERTY DEVELOPMENT COMPANY
An Approved Property Development company is entitled to a deduction of fifteen percent (15%) of the capital cost of any building constructed by it and proved to the satisfaction of the Board of Inland Revenue to have commenced:
(i) before 31/12/2005 and completed on or before 31/12/2007; or
(ii) on or after 01/01/2008 and is completed on or before 31/12/2014.
that is to be used for commercial or industrial purposes by it, a purchaser or a lessee.
Where the period of construction extends over more than one (1) year of income, the deduction shall be allowed in the year of income in which the building is completed. Where part only of the building is to be used for commercial or industrial purposes the deduction may, according to the extent of its non-commercial or industrial use, be pro-rated.
With a view to encouraging the development of the hotel industry in Trinidad and Tobago and to stimulate tourism development generally, the Tourism Development Act provides incentives to both Hotel Owners and Hotel Operators.
A summary of the major incentives are:
The details of the incentives must be gleaned from a study of the legislation. It should be noted that there are specific investment criteria to qualify for incentives under the legislation. Some areas of tourism are specifically reserved for nationals. Some of the areas of investment are:
An application to be licensed as an approved tourism project must be made to the Corporation (the State Authority to which the responsibility for tourism in Trinidad and Tobago is assigned) and if in Tobago, the Corporation shall submit the application to the Tobago House of Assembly for recommendation, together with a proposal for the tourism project containing information as prescribed by the Act. Note that in order to obtain benefits as an approved tourism project, the project shall:
Under the Petroleum Taxes Act governing Petroleum Profits Tax, several incentives are available, including:
These allowances are claimed on the entity’s tax returns.
There is a production expenditure rebate program providing cash rebates for expenditure accrued while filming in Trinidad and Tobago. The program is administered by the Trinidad and Tobago Film Company, a state agency under the Ministry of Trade and Industry.
Companies are allowed deductions in determining chargeable income for expenditure in relation to the following activities:
Under the Income Tax (In Aid of Industry Act), the annual allowance of twenty percent (20%) is to be calculated on a straight line basis on the residue of expenditure after deduction of the initial allowance. Under this Act, the following concessions are available to all manufacturing trades:
These allowances are claimed on the entity’s tax returns.
Full exemption from Customs Duties is available to an applicant who holds a license from the Minister for imports of Machinery and Raw Materials in the following sectors:
Cabinet approval is required for a full exemption and applications are made to the Permanent Secretary, Ministry of Finance.
In the Manufacturing/Assembly sectors, partial exemption from Customs Duties is available for imports as follows:
Exemption from import surcharges is available on raw materials, intermediate goods, packaging materials and other inputs which are not locally manufactured. These are granted by Customs at the port of entry on production of adequate documentation. Stamp Duty on imports has been eliminated.
Exporters targeting countries other than CARICOM countries can benefit from the following incentives:
The Free Zones Act 1988 (as amended in 1995) established the Trinidad and Tobago Free Zones Company to promote export development and foreign investment projects in a bureaucracy-free, duty-free and tax-free environment for prescribed activities. Free zone enterprises may be established in any part of the country. They are one hundred percent (100%) exempt from:
Other benefits include:
Investment opportunities include:
Applications to operate in a Free Zone are made by way of specified forms submitted to the Trinidad and Tobago Free Zone Company. After receiving a recommendation by such entity, the Minister may by Order designate an area a Free Zone, the limits of which are defined in the Order.
Under the Fiscal Incentives Act benefits are granted to large scale manufacturers falling within one (1) of five (5) classifications under the Act.
To qualify the company must meet the following criteria:
Pursuant to the Income Tax Act, income arising in Trinidad and Tobago is subject to withholding tax in Trinidad and Tobago at the rate of fifteen percent (15%). Trinidad and Tobago has entered into several Double Taxation Treaties with several jurisdictions. In some instances these treaties decrease the withholding tax rate.
Of several proposals made in the 2015 Budget, among others, the following were implemented:
Under the Income Tax Act, there is an annual wear and tear allowance of ten percent (10%) of the capital expenditure on the construction of a building or structure or in respect of capital improvements made on or after 1st January, 1995. There are also annual wear and tear allowances on plant and machinery. In respect of plant and machinery acquired after 1st January, 1995, the concept of pooling of such assets was introduced for the grant of wear and tear allowances. The allowance is calculated at the applicable rate to aggregate expenditure incurred on assets within a particular group on a declining basis.