Asset class | Depreciation rate

A: Buildings | 10%

B: Vehicles, machinery, equipment, furniture | 30%

C: large plants, IT hardware, trucks | 33.3%

D: particularly large installations, aircraft | 40%

The Caribbean island nation of Trinidad and Tobago is in some ways an exceptional phenomenon. Many small and even larger island states, such as Malta and Cyprus, have developed tax regimes that are sometimes associated with classical tax havens. Trinidad and Tobago, however, levies taxes on the model of many large industrial nations. Is it because of their oil and gas wealth? But then Saudi Arabia and the UAE, for example, would have to levy taxes on the Western model, right?

1st Trinidad and Tobago and its Taxes – Introduction

Many small island states are said to be tax havens. Especially when it comes to islands along the equator, this assumption is often even reasonably justified. This is usually due to a very simple reason: otherwise, these small states have hardly any opportunities for economic development. Because on small South Sea or Caribbean islands, with a limited population size and potential natural events, volcanic eruptions, tsunamis and hurricanes, which can cause considerable devastation, tourism from a long way away can be considered as an industry. So many of these island states have resorted to winning foreign companies and entrepreneurs for a company headquarters – yes, exactly, usually just a letterbox – in their own territory through favorable tax regimes and secret ownership. After all, you can then collect fees for such companies. And that's usually enough.

But there are also exceptions to this pattern. Small island states, which are hardly recognizable on a globe, but which know a modern tax regime, such as in our present example Trinidad and Tobago, may well surprise us.

General about Trinidad and Tobago

Trinidad and Tobago is located at the southern end of the Lesser Antilles off the coast in eastern Venezuela, separating the Caribbean from the Atlantic. In fact, the geographical location helps the two islands escape the worst storms in the Caribbean hurricane season. The islands are a hotspot for biodiversity and many natural phenomena, such as a natural asphalt lake. This points out that in the underground of the state territory rich oil reserves, which the country also diligently promotes.

Trinidad and Tobago were discovered by Christopher Columbus in 1498. Thus, it is understandable that the Spanish crown claimed the two islands. But later other nations also sought to take possession of this corner of the world, especially England. In fact, Britain adopted Trinidad and Tobago into independence in 1962. Since the islands were British colonies since 1797, it is understandable that English is now the national language.

In order to better understand the present and its taxes in Trinidad and Tobago, we have to go back in time. So on the islands, as elsewhere in the Caribbean, the cultivation of sugar cane took place for a long time. At first, slaves from Africa were employed on the plantations. But with the abolition of slavery in 1834, the previous source of cheap labor dried up; There was a change. From now on, contract workers from India were increasingly brought to the Caribbean to take over this work. Therefore, the population of Trinidad and Tobago today is a mixture of many peoples, in which the indigenous share is, however, vanishingly small.

Oil production is also linked to a cultural invention from Trinidad and Tobago. The steelpan was developed from discarded oil barrels and of course plays a big role in the great carnival, which is celebrated in Trinidad and Tobago omittedly to the local Calypso. Due to the rich natural resources as well as the polyethnic population, the cuisine of the Caribbean idyll is also internationally praised.

General information on the tax regime of Trinidad and Tobago

Unsurprisingly, the tax laws of Trinidad and Tobago are tailored to the model of their former colonial power. This means, therefore, that in Trinidad and Tobago taxes are imposed on the basis of the world income principle. Here alone one can already see that the Caribbean state had no interest in a questionable existence as a tax haven.

This leads us to the question of tax liability. In Trinidad and Tobago, an unlimited tax liability is actually distinguished from a limited tax liability. Unrestricted taxation applies if you stay in the country for at least 183 days a year. Unlike in Germany, residence is therefore not a criterion.

The calendar year is applicable to taxes in Trinidad and Tobago. Income tax returns must be filed by 30 April of the following year. If the deadline expires, however, this will only lead to consequences after a further six months. However, those who only receive income from self-employment are exempt from the obligation to submit an income tax return (applies only to unlimited tax liability). This is due to the fact that Trinidad and Tobago operate a classic withholding tax by means of pay-as-you-earn (PAYE for short). Therefore, filing an income tax return may still be useful in order to have advertising costs taken into account for tax purposes. It is also interesting with regard to income assessment that there is no co-investment there. Married couples must therefore declare their income separately.

For limited taxpayers, the relevant double taxation agreements (DTA) are relevant.

Taxes in Trinidad and Tobago

4.1. Income tax

4.1.1. General rules on income tax

The regulations on income tax are very simple. For example, there is a flat tax rate of 25%, which applies up to an income level of TTD 1 million (equivalent to about EUR 136,000). On the other hand, parts of income that go beyond this limit are taxed at a tax rate of 30% by Trinidad and Tobago.

But it should also be noted that there is an annual allowance of TTD 90,000 in Trinidad and Tobago. As a rule, however, only unlimited taxpayers can make use of this. For limited taxpayers abroad, this is only eligible if they are paid pensions and comparable services from Trinidad and Tobago.

All income from self-employment, pursuit of a profession, trade, provision of services, agriculture and forestry, rental and capital gains are taxed.

4.1.2. Deductions on income tax

Advertising costs for employees are only applicable if they are actually incurred. This applies exclusively to travel expenses for which there was no reimbursement by the employer. An employee lump sum is therefore unknown in Trinidad and Tobago.

In addition, you can deduct further costs from income. This includes, among other things, study abroad costs up to a maximum of TTD 72,000 (for taxpayers, their spouses and children), post-divorce maintenance payments, purchase of the first property for own residential purposes up to a maximum of TTD 30,000, contributions to the national insurance fund NIS (Social Security) up to a maximum of TTD 60,000 and donations to charity or sports associations in full, provided that these cumulatively amount to a maximum of 15% of income. The latter also applies to corporate tax.

In addition, expenses for the conversion of buildings can be taxed if they are intended to serve as a guest house and have been approved by the authorities beforehand. Similar regulations exist for the construction or extension of hotels, for which prior approval by the tourism authority must also be granted. Here, the costs can be deducted 20% each in five of the eight years following completion or approval. The tourism authority must confirm the completion with a certificate.

4.1.3. Taxes on capital gains in Trinidad and Tobago

Investment income is subject to taxation if there is a period of less than 12 months between the acquisition and disposal of assets (such as securities). All expenses in connection with the acquisition, appreciation or security are deductible from the income. If there is a loss, this can only be offset with other positive capital gains. A loss carry forward is also possible.

4.1.4. Tax-free revenue

In principle, homes, household items and private cars sold for a maximum of TTD 5.000 are excluded; There is no tax on this in Trinidad and Tobago.

Among other things, winnings from lotteries, bets, gambling remain tax-free, provided they were legally acquired. On the other hand, such losses are generally excluded from the tax approach.

4.2. Taxation of entities in Trinidad and Tobago

4.2.1. Corporate income tax

Unlike partnerships, which are transparently taxed under the provisions of the Income Tax Act in Trinidad and Tobago, corporations and other corporations pay direct taxes as legal entities. They are subject to corporate tax if they are resident in the country. The residency is checked according to the criterion of management. If the management and control takes place largely in the country, a company is considered to be based in Trinidad and Tobago. The same applies to branches and establishments in Germany. By way of derogation, definitions in any DBAs apply. Foreign-based companies in Trinidad and Tobago, on the other hand, only pay taxes on profits made domestically. Otherwise, the world income principle applies.

Trinidad and Tobago levies flat-rate corporate taxes. However, one distinguishes in which industry a company operates. In general, a tax rate of 30% applies. Banks and petrochemical companies, on the other hand, have a tax rate of 35 %. Oil-producing and processing companies even pay 50% of taxes (petroleum profit tax, PPT). However, this does not apply to certain undertakings producing offshore oil; they are subject to a tax rate of 30 %. Another exception is shipping companies and insurance companies that offer long-term insurance. Here the rate is 0%, 15%, 25% or 30%.

Investment income from the sale of securities is also tax-free at the level of corporate tax, provided that a speculative period of twelve months is observed. This also applies to income distributions received. Interest and royalties are subject to corporate tax.

Also interesting are the regulations that Trinidad and Tobago introduced regarding corporate tax depreciation. Depreciable assets are divided into four different classes:

Compared to Germany, the depreciation rates in Trinidad and Tobago are therefore very business-friendly.

4.2.2. Business tax

An additional tax to be borne by corporations in Trinidad and Tobago is the business tax. This amounts to 0,6 % on turnover and other revenues and receipts, provided that it exceeds the amount of corporate tax during the same assessment period. If the annual turnover of a company is less than TTD 360,000, the business tax is not applicable. Exceptions also apply to certain sectors, including those from the oil industry.

Other derogations apply to small and medium-sized listed companies. During the first five years in which their securities are traded on the Trinidad and Tobago stock exchange, the business tax is eliminated. In the following five years, it is still reduced by half.

4.2.3. National Environmental Fund (Green Fund) levy

In addition to the business tax, companies (here also partnerships) in Trinidad and Tobago pay a levy into the National Environmental Fund. This levy is payable on a quarterly basis. The tax rate is 0.3% and is levied on the income of companies. Apart from this, there are also exceptions here for small and medium-sized listed companies on the model of the business tax.

This revenue is earmarked for the promotion of environmental protection measures, in particular the establishment and protection of nature reserves, training of the population, reforestation and other restoration measures.

4.2.4. unemployment tax

Petroleum companies are obliged to pay a tax of 5 % of their taxable profits as unemployment tax in Trinidad and Tobago. However, compensation by carried forward losses is excluded.

4.2.5. Additional Petroleum Tax (SPT)

Oil production in Trinidad and Tobago is the focus of further taxes: the Supplementary Petroleum Tax (SPT). Oil-producing companies in Trinidad and Tobago pay taxes on the profits from the sale of crude oil depending on the time they acquire their licences and whether the production takes place on land or offshore. However, taxes also vary depending on the price the company earns on the sale of the extracted crude oil. If the selling price is below USD 13 per barrel, there is generally no SPT. If the production license was granted before 01.01.1988, companies with land-based production pay taxes for sales at a barrel price of USD 49.50 or more with a maximum tax rate of 38 %. Under the same conditions, offshore oil companies, on the other hand, have to expect a tax rate of 45 %. However, if the licence has only been granted since 1988, the top tax rate for SPT is 36 % for offshore activities and 21 % for oil production on land.

SPT is the only tax deductible on income tax when determining taxable profit.

4.2.6. Tax withheld in Trinidad and Tobago

Persons, including legal entities, not resident in Trinidad and Tobago, are subject to withholding taxation. In the case of profit distributions, a tax rate of 10 % generally applies. This is halved in the case of distributions between the subsidiary and the parent company. Other payments to natural persons abroad are subject to 15% withholding tax. Although this tax rate also applies to payments to foreign companies, it can bring about reductions in the tax rate in Trinidad and Tobago, either by special regulations by DBAs or by special orders by the Ministry of Finance permitted by the Income Tax Act.

4.3. Excise duties in Trinidad and Tobago

The main excise duty in Trinidad and Tobago is value-added tax (VAT). Consumer goods of a general nature are subject to a tax of 12.5%. Exceptions that remain tax-free are foodstuffs, crude oil and natural gas, and equipment and machinery intended for agricultural use. In addition to these goods, a number of services in Trinidad and Tobago are also exempt from taxes: financial services, brokerage commissions, rental of residential property, education, hotel accommodation and yacht chartering.

However, certain services are subject to taxes of a different kind. For example, some financial services are subject to 15% transaction tax.

Additional excise duties are still to be paid for certain goods that are known in this or similar form from other tax regimes, including Germany: tobacco products, alcoholic beverages and mineral oil products, especially fuels.

4.4. Property tax

For some time the taxation of assets had been suspended in Trinidad and Tobago. Since 2017, the collection of property tax is actually planned again, but the local financial authorities have to struggle with the same basic problem that also in Germany the property tax and the property tax plague: obsolete unit values. Nevertheless, we want to reflect here how these taxes are calculated in Trinidad and Tobago. Because as early as 2024, the wealth tax, which is basically a property tax, is to be raised again.

In general, the annual value of a rental, even a potential rental if none takes place, is considered as a basis for assessment. This is quite a big difference to German tax law. If there is actually no rental for a property, one resorts instead to its capital costs. This applies a factor to these values, which differs according to the type of property. The net present value of residential buildings is subject to a factor of 3,5 %. For real estate used for trading or other commercial or professional activities, the factor increases to 5 %. This factor also applies to industrial buildings, but for freestanding industrial installations without roofing, only 3 % can be used. 10 % is deducted from this tax base to take account of vacancy or rental losses. The following tax rates apply to the resulting value, depending on the type of use of the respective property: