Maximizing your Tax Benefits As a Trinidad Resident
- Daniel Tittil
- Apr 23, 2024
- 7 min read
Surprisingly a large percentage of persons, even finance industry professionals, are not aware or take advantage of tax benefits available to them as residents of Trinidad and Tobago. Ultimately, the state provides various incentives to influence your behaviours and provides a financial benefit for following those incentives. This can mean a greater disposable income for you. Some use their tax refunds to help fund core goals like a deposit for a home purchase, home renovations, vacations, children’s education, etc.
While I am not a tax advisor, I would like to share a few of the common tax incentives, that in my experience are not fully taken advantaged of. I encourage you to seek tax advice for your specific situation, so feel free to send me a message if you need a referral to a tax advisor. In most cases, the benefit gained from getting tax advice is more than the cost of engaging a tax advisor.
A note on Income Tax- employed vs self employed.
Income taxes are treated differently for persons in regular employment vs. self employed persons. According to the Ministry of Finance’s website, “if you are an employee of a business, the Tax Declaration 1 Form (commonly referred to as the TD1 form) is used to calculate the amount of tax that is withheld by your employer.” This simply means that if this is your only form of income then your employer will withhold your full tax liability from your salary/wage and only pay you your after-tax salary (after other deductions like NIS deductions & health surcharge) while forwarding your income tax to the tax authority. Therefore, in this circumstance,, there is no obligation to file a tax return. “However, you can choose to file a return if you disagree with the amount of tax withheld by your employer.”
There are a number of reasons why you can disagree with the amount of tax withheld by your employer (an obvious one is if you suspect the employer made any error in their calculations). For example, you may have contributed to an approved pension plan/fund/annuity and have failed to let your employer formally know.
In that case, you may be entitled to tax deductions and if you don’t file a tax return, showing proof of those contributions, you will not receive a tax refund. Employed persons have two choices when it comes to situations like these.
Option 1- File your tax return annually
If you are unsure of your annual deductions in advance of a financial year then you may opt to file your tax return annually, after the financial year but before the due date. That is, for e.g., if you make lump sum contributions to your approved pension plan, you gather proof of those contributions and include that in your tax filing. Provided that you did not already cross the deduction limit for that category and did pay income tax*, you would be entitled to a refund. The government would likely issue a cheque once your tax return has been filed. Kindly note that in reality, the government can take weeks, months or years to provide the cheque and you may need to consistently follow up with the Board of Inland Revenue on the status of your refund.
* This article would explore the deduction limits for various categories but readers are advised to keep abreast of new developments as the tax regime is subject to changes often. Some official resources are:
There some major reforms expected when the Trinidad and Tobago Revenue Authority assumes operations.
* Readers are reminded that a tax refund can only be approved to the extent that you have paid taxes. For e.g., if you earn $7,500 monthly, you likely do not pay income tax/PAYE (the first TT$90,000 of employable income is not taxable as of January 2023) and so, even if you contribute to an approved pension, you would not be entitled to a refund. The same principle applies if you already claimed deductions to the full extent of income taxes paid for that tax year.
Option 2- Get approval from the Board of Inland Revenue
If as an employed person, you don’t fancy waiting on the tax refund and know your tax deductions in advance, you can apply to the Board of Inland Revenue to approve your tax deductions and provide a guideline to your employer. According to the Ministry of Finance, “you must seek approval from the Inland Revenue Division by submitting the TD1 form to the Taxpayer Section at the addresses below. The Inland Revenue Division will issue a Certificate of Approval for PAYE Tax Deduction form to your employer to guide tax deductions. “. These addresses are stated here for convenience:-
Taxpayer Services Section
Inland Revenue Division
HEAD OFFICE
GOVERNMENT CAMPUS PLAZA
2-4 Ajax Street
Port of Spain
Trinidad
Tel. (868) 623-1211 or 800-8299 (TAXX)
South Regional Office
52 Cipero Street
San Fernando
Trinidad
Tel. (868) 657-6041/5
Tobago Regional Office
Sangster’s Hill
Scarborough
Tobago
Tel. (868) 639-2410/2538
Common Tax deductions that are missed.
TERTIARY EDUCATION EXPENSES - LIMITED TO $72,000
Payments made in the year of income for tuition for yourself, your spouse or children can be used a tax deduction subject to certain conditions. Official communications state that only payments made to the foreign person or institution are allowed. Claims are not allowed for Institutions within the Region apart from St. George’s University which is considered a US Institution and where the tuition is at a local institution and that institution is affiliated with another outside of the region, the taxpayer is allowed to claim any foreign expenses made in pursuing the course to that foreign institution. The duration of the course MUST BE at least two (2) semesters or one academic year.
You are allowed only one return travel per year for deduction purposes, and the deduction can be shared within the household. In my experience, pursuing professional designations from institutions outside of T&T, even if a course is provided in T&T, is usually approved.
To make the claim you will need to provide the acceptance letter, proof of payment and statement of expenses.
FIRST TIME HOME OWNER - LIMITED TO $30,000
If you are a first time home owner, you are entitled to deduct the interest expense portion of your mortgage payment up to TT$30,000 per year for the first 5 years of ownership (that is $30K each year, in possible tax deductions). Where the property is constructed or purchased a copy of the Completion Certificate or Deed of Conveyance respectively must be provided. The individual must provide evidence of proof of ownership (your deed of assignment). The individual must satisfy the B.I.R. that the house to be used as a residence is a first-time acquisition (you should not rent out this property). The individual must provide an original statement from a financial institution/affidavit confirming first time acquisition and date property was acquired.
You can ask your bank branch manager to provide a mortgage interest letter for the year in question addressed to the Board of Inland Revenue.
PURCHASE OF NATIONAL TAX FREE SAVINGS BONDS WITH MATURITY OF 5, 7, OR 10 YEARS - 25% OF THE FACE VALUE OF BONDS PURCHASED, LIMITED TO $5,000
If you purchase one of the National Tax free Savings Bonds (e.g. the National Investment Fund bonds), then 25% of the face value can be used as a tax deduction, up to a maximum of TT$5000. That is, the maximum benefit would accrue at buying TT$20,000 face value. See your broker/investment advisor if you would like to purchase these bonds. Certificate/Receipt of purchase of the Bonds must be provided.
SOLAR WATER HEATING EQUIPMENT TAX CREDIT- LIMITED TO $10,000
If you purchase and install a solar water heater and associated equipment for household use, then you are entitled to a tax credit of 25% of the cost, up to 10,000. This means that the maximum benefit would come with a TT$40K, expenditure. The economic feasibility of adopting the use of solar water heater in your home is dependent on your situation and usage levels.
CNG KIT AND CYLINDER TAX CREDIT- Limited to $10,000
If you purchase and install a CNG cylinder and kit in your motor vehicle, you are entitled to a tax credit of 25% of the total cost, up to a maximum tax credit of $10,000. You must provide a receipt for the purchase and installation cost and the certified copy of ownership of the vehicle. The maximum benefit would come with a TT$40K, expenditure. The economic feasibility seems to be high given the low cost of CNG vs gas prices.
CONTRIBUTIONS/PREMIUMS PAID TO DEFERRED ANNUITY/TAX SAVINGS/PENSION FUND PLANS AND 70% NIS CONTRIBUTIONS - LIMITED TO $60,000
If you pay into an approved pension plan/fund or approved deferred annuity plan, you may be entitled to deduct up to $60,000 per year from your income tax liability. By default, every qualified worker has mandatory contributions to the National Insurance Scheme. Your employer would likely already factor your NIS payments as a tax deduction. If you have an employer sponsored approved pension plan/scheme/annuity plan, this would also be factored into your tax withheld.
Common Tax deductions that are missed.
CONTRIBUTIONS/PREMIUMS PAID TO DEFERRED ANNUITY/TAX SAVINGS/PENSION FUND PLANS AND 70% NIS CONTRIBUTIONS - LIMITED TO $60,000
To the extent that you have room after these deductions, you may voluntarily contribute to a BIR approved pension plan/fund/annuity. In this case, you must provide a statement from the financial institution showing the amount paid you paid for the tax year and MUST STATE “This Plan is Approved by the Board of Inland Revenue”.
A special note is needed here since I have canvassed privately offered annuities and pension fund plans and many of them provide sub-optimal performance- even after taking into account the tax benefit. That is to say, the investor contributing to a retirement goal, may be better off investing in a non-approved BIR investment vehicle using their after-tax dollars since the after tax return is higher than the return offered by many of these products on the market. Not all pension products are sub-optimal and annuities can have a place in your retirement portfolio. On a general basis, I would recommend a mix of tax advantaged and non-tax advantaged products but the skew of which to contribute most to would depend on the products available to you through your employer. For a goal so important as retirement, I would recommend seeing a qualified personal financial planner to maximize your retirement income. If you need a contact for a personal financial planner, kindly send me a message and I would be happy to share a few contacts.
Closing comments
These are not a comprehensive list of tax benefits nor does it address the needs of self-employed persons. Self employed persons should seek tax advice specific to their situation as the deduction limits and rules can become complex depending on the nature of your business. Again, feel free to reach out if you fall into this category and need a referral to a tax advisor.
I hope this article was helpful in maximizing your tax deductions and ultimately leaves you in a better financial position.
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