By Miguel Vasquez

The Gov­ern­ment of Trinidad and To­ba­go has in­tro­duced a num­ber of tax in­cen­tives over the past few years, aimed at stim­u­lat­ing growth or en­cour­ag­ing de­vel­op­ment in cer­tain sec­tors and in­dus­tries. With the na­tion­al bud­get due to be an­nounced with­in the next few weeks, it would be use­ful to re­call some of the pre­vi­ous in­cen­tives, as com­pa­nies and busi­ness­es con­sid­er how they can op­ti­mise use of these in­cen­tives, or chart a course to ben­e­fit from any fur­ther in­cen­tives that may be in­tro­duced.

Con­struc­tion and man­u­fac­tur­ing in­dus­tries

For com­pa­nies in­volved in the man­u­fac­tur­ing sec­tor, the Gov­ern­ment in­tro­duced a one-time cred­it for man­u­fac­tur­ing com­pa­nies that in­vest in new ma­chin­ery, pro­duc­tion lines or new equip­ment, up to a max­i­mum cred­it of $50,000. The com­pa­ny must, how­ev­er, be an ap­proved man­u­fac­tur­ing com­pa­ny as cer­ti­fied by the Min­is­ter of Trade and In­dus­try.

Fur­ther­more, man­u­fac­tur­ing com­pa­nies are al­so en­ti­tled to a re­duc­tion in Cor­po­ra­tion Tax, name­ly to 25 per cent, on the first $100,000 that is ex­pend­ed on in­vest­ments in projects re­lat­ing to in­for­ma­tion tech­nol­o­gy, digi­ti­sa­tion, and tech­nol­o­gy de­vel­op­ment, to ad­vance growth in the man­u­fac­tur­ing in­dus­try. Petro­chem­i­cal com­pa­nies are ex­clud­ed from this in­cen­tive.

An ap­proved prop­er­ty de­vel­op­ment com­pa­ny is en­ti­tled to deduct from any cap­i­tal ex­pen­di­ture in­curred by that com­pa­ny in the con­struc­tion of a build­ing that is to be used for com­mer­cial or in­dus­tri­al pur­pos­es by the com­pa­ny, a pur­chas­er or lessee, an amount equal to 15 per cent where con­struc­tion of the build­ing is proved to have com­menced be­fore the De­cem­ber 31 2005 and is com­plet­ed on or be­fore the De­cem­ber 31, 2007, or to have com­menced on or af­ter the Jan­u­ary 1, 2008, and is com­plet­ed on or be­fore the De­cem­ber 31, 2014. Al­ter­na­tive­ly, an amount equal to 20 per cent of the ex­pen­di­ture, where con­struc­tion of the build­ing is proved to have com­menced on or af­ter the Jan­u­ary 1, 2015, and is com­plet­ed on or be­fore the De­cem­ber 31, 2024.

Re­new­able en­er­gy

T&T has in­tro­duced a num­ber of mea­sures to in­cen­tivise the use of re­new­able en­er­gy, in­clud­ing the in­tro­duc­tion of wear and tear al­lowances up to 150 per cent in re­spect of ex­pen­di­ture in­curred on the ac­qui­si­tion of plant, ma­chin­ery, parts and ma­te­ri­als for use in the man­u­fac­ture and ac­qui­si­tion of so­lar wa­ter heaters, and wind tur­bines, and equip­ment, so­lar pho­to­volta­ic sys­tems and sup­port­ing equip­ment; as well as al­lowances of 150 per cent in re­spect of ex­pen­di­ture in­curred in car­ry­ing out an au­dit for the de­sign and in­stal­la­tion of en­er­gy sav­ing sys­tems, an ac­cel­er­at­ed al­lowance at the rate of 75 per cent on ex­pen­di­ture in­curred in the ac­qui­si­tion of plant and ma­chin­ery by a cer­ti­fied en­er­gy ser­vice com­pa­ny for the pur­pose of con­duct­ing en­er­gy au­dits, and ex­emp­tions on val­ue added tax, cus­toms du­ties and mo­tor ve­hi­cles tax on cer­tain new or used elec­tric cars.

Most re­cent­ly, the Gov­ern­ment in­tro­duced a mea­sure that re­duces the rate of VAT on new equip­ment for man­u­fac­tur­ing com­pa­nies util­is­ing al­ter­nate en­er­gy tech­nolo­gies; re­new­able en­er­gy op­tions, such as gasi­fiers us­ing bio­mass, and har­ness­ing re­new­able en­er­gy through wind, so­lar and wa­ter, to 0 per cent.

Tech­nol­o­gy and digi­ti­sa­tion

Reg­is­tered pay­ment ser­vice providers and elec­tron­ic mon­ey is­suers are en­ti­tled to a tax cred­it for ex­pen­di­ture in­curred in the ac­qui­si­tion of equip­ment, in­tel­lec­tu­al prop­er­ty re­lat­ed to soft­ware out­sourc­ing and cre­ation, prod­uct de­vel­op­ment, web de­vel­op­ment, se­cu­ri­ty and main­te­nance, host­ing, reg­u­la­to­ry costs, and bank set­tle­ment fees, up to a max­i­mum of $50,000. This in­cen­tive was in­tro­duced in or­der to en­cour­age the growth of on­line fi­nan­cial trans­ac­tions and the de­vel­op­ment of a dig­i­tal econ­o­my.

More­over, com­pa­nies, whose core busi­ness ac­tiv­i­ties are dig­i­ti­za­tion and tech­nol­o­gy so­lu­tions (i.e., ac­tiv­i­ties re­lat­ing to soft­ware pro­grammes or ser­vices), are en­ti­tled to be taxed at half of the cor­po­ra­tion tax rate on their first $100,000 of charge­able in­come for in­come year 2022, and on the first $200,000 of charge­able in­come for in­come year 2023.

Com­pa­nies en­gaged in re­search and de­vel­op­ment are en­ti­tled to a cap­i­tal al­lowance of 40per cent (up to a max­i­mum of $3,000,000) on ex­pen­di­ture in­curred in the said re­search and de­vel­op­ment. For the pur­pos­es of the al­lowance, re­search and de­vel­op­ment refers to the process in­tend­ed to cre­ate a new or im­proved prod­uct.

Tech start-ups, new tech busi­ness­es and ex­ist­ing tech busi­ness­es, are en­ti­tled to a su­per-al­lowance at the rate of 150 per cent, but up to a max­i­mum of $3,000,000. The com­pa­nies falling with­in the scope of en­ti­tle­ment are com­pa­nies that were in­cor­po­rat­ed with­in three years from the Jan­u­ary 1, 2020, and whose pur­pose is to pro­vide dig­i­tal tech­nol­o­gy prod­ucts or ser­vices.

A com­pa­ny that in­curs ex­pen­di­ture in cre­at­ing em­ploy­ment in a tech­nol­o­gy in­dus­try, where the em­ploy­ees com­prise a ma­jor­i­ty of per­sons be­tween the ages of 18 and 35, are en­ti­tled to an al­lowance equal to 150 per cent of the ac­tu­al ex­pen­di­ture in­curred in re­spect of the cre­ation of em­ploy­ment, up to a max­i­mum of $3,000,000.00. The tech­nol­o­gy in­dus­try for these pur­pos­es is de­fined as de­vel­op­ers of com­put­er soft­ware and hard­ware, providers of cloud ser­vices, in­ter­net ser­vices, e-com­merce ser­vices, con­sumer elec­tron­ics ser­vices and telecom­mu­ni­ca­tion ser­vices.

The Gov­ern­ment al­so in­tro­duced ex­emp­tions on VAT, on­line pur­chase tax and Cus­toms Du­ties, on all com­put­ers, com­put­er hard­ware, soft­ware, mo­bile and dig­i­tal equip­ment, cell phones, ac­ces­sories and com­put­er pe­riph­er­als.

En­er­gy in­dus­try

A num­ber of in­cen­tives have al­so been in­tro­duced in the en­er­gy in­dus­try in­clud­ing an in­crease to the tax cred­it to 30 per cent (but up to a max­i­mum of $500,000) to off­set the costs of in­vest­ment in car­bon cap­ture and stor­age, and en­hanced oil re­cov­ery, for com­pa­nies who have in­vest­ed in this ac­tiv­i­ty. The ex­pen­di­ture must be in­curred in tech­nol­o­gy which pre­vents or re­moves car­bon emis­sions from the at­mos­phere and stores the cap­tured car­bon emis­sions for reuse in man­u­fac­ture, or stores the cap­tured car­bon emis­sions un­der­ground or oth­er­wise, or for the in­creased re­cov­ery of crude oil from a reser­voir by us­ing var­i­ous meth­ods, in­clud­ing steam, wa­ter flood­ing or gas in­jec­tion in­to an ex­ist­ing oil well.

Gen­er­al

Cer­tain ap­proved small com­pa­nies may ob­tain an ex­emp­tion from Cor­po­ra­tion Tax for a pe­ri­od of six years. More­over, small and medi­um en­ter­pris­es who are new­ly list­ed on the T&T Stock Ex­change are en­ti­tled to a 0 per cent tax rate on Busi­ness Levy and Green Fund Levy for the first five years fol­low­ing list­ing, and to a 50 per cent re­duc­tion in these tax­es for the sub­se­quent five years. These com­pa­nies are al­so en­ti­tled to an ex­emp­tion from Cor­po­ra­tion Tax for the first five years fol­low­ing list­ing, as well as a 50 per cent re­duc­tion in their Cor­po­ra­tion Tax rate for the sub­se­quent five years.

A small and medi­um en­ter­prise is con­sid­ered to be a com­pa­ny whose min­i­mum is­sued share cap­i­tal is:

(a) $5,000,000 and max­i­mum is­sued share cap­i­tal does not ex­ceed $50,000,000 fol­low­ing the ini­tial pub­lic of­fer­ing;

(b) min­i­mum and max­i­mum cap­i­tal base com­pris­es of is­sued share cap­i­tal on­ly and does not in­clude re­tained earn­ings and ac­counts trans­ferred from such is­sued share cap­i­tal or ac­count

(c) a min­i­mum of 25 un­con­nect­ed share­hold­ers own a to­tal of at least 30 per cent of the new is­sued share cap­i­tal of the com­pa­ny, and

(d) whose cap­i­tal is raised with the is­suance of an ini­tial pub­lic of­fer­ing to be fol­lowed by a list­ing on the T&T Stock Ex­change no more than 60 days af­ter al­lot­ment of the is­sue.

An al­lowance aimed at en­cour­ag­ing com­pa­nies and busi­ness­es to hire young per­sons (i.e., per­sons be­tween the ages of 16 and 25) who com­plet­ed sec­ondary school ed­u­ca­tion was al­so in­tro­duced. The struc­ture of the hire is re­quired to be in the form of an ap­pren­tice­ship train­ing pro­gramme that is reg­is­tered with the Na­tion­al Train­ing Agency. A com­pa­ny would be en­ti­tled to claim an al­lowance equal to 150 per cent of the ex­pen­di­ture in­curred in hir­ing the young per­son, up to a max­i­mum of 20 per cent of the to­tal wages and salaries bill of the com­pa­ny for the year.

The With­hold­ing Tax rates on dis­tri­b­u­tions (most rel­e­vant­ly, div­i­dends) to non-res­i­dents were al­so re­duced. For dis­tri­b­u­tions made to a par­ent com­pa­ny, the re­duc­tion was from 5 per cent to 3 per cent, while dis­tri­b­u­tions made oth­er than to a par­ent com­pa­ny, are now sub­ject to With­hold­ing Tax at the rate of 8 per cent (i.e., down from 10 per cent).

Com­pa­nies who in­cur ex­pen­di­ture in the con­ser­va­tion or preser­va­tion of prop­er­ty un­der the Na­tion­al Trust of T&T, is en­ti­tled to a 150% tax al­lowance on the ex­pen­di­ture it in­curs, up to $1,000,000.

T&T al­so par­tial­ly pro­claimed the Spe­cial Eco­nom­ic Zones Act, Act No. 1 of 2022 which pro­vides for the de­vel­op­ment, op­er­a­tion and man­age­ment of Spe­cial Eco­nom­ic Zones (‘SEZ’) with­in which favourable fis­cal in­cen­tives may be pro­vid­ed. Based on the type of li­cence is­sued, ben­e­fits may in­clude re­duc­tions in the rate of Cor­po­ra­tion Tax, re­search and de­vel­op­ment al­lowances, ex­emp­tions on prop­er­ty tax, stamp du­ty on in­stru­ments for the pur­chase, lease and ac­qui­si­tion of land for its use, and im­port du­ties for ap­proved cap­i­tal goods, spare parts, raw ma­te­ri­als, build­ing ma­te­ri­als and ar­ti­cles.

It would be in­ter­est­ing to see what fur­ther in­cen­tives and mea­sures are in­tro­duced by the Gov­ern­ment for the next fis­cal year, as Trinidad and To­ba­go con­tin­ues to strive to stim­u­late eco­nom­ic growth across all sec­tors and in­dus­tries.

Miguel Vasquez is a Se­nior As­so­ciate at M. Hamel-Smith & Co. He can be reached at mhs@trinidad­law.com. Dis­claimer: This Col­umn con­tains gen­er­al in­for­ma­tion on le­gal top­ics and does not con­sti­tute le­gal ad­vice.