Incentives to Invest in Trinidad & Tobago

8/8/2019 Incentives to Invest in Trinidad & Tobago

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Incentives to Invest in Trinidad & Tobago

The Governments 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 toremove 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 dutyconcessions or other tax allowances.

In this Chapter, Nicole Ferreira-Aaron, Partner, and Keomi Loureno, Associate in Hamel-Smith's Business Transactions Practice Group, offer investors an overview of the type of

incentives which are available to encourage investment.

Corporation Tax Concessions

Under the Income Tax Act, there is an annual wear and tear allowance of 10% of the capital expenditureon construction of a building or structure or in respect of capital improvements made on or after 1stJanuary, 1995. There are also annual wear and tear allowances on plant and machinery. In respect of

plant and machinery acquired after 1st January, 1995, there is the introduction of the pooling of suchassets for the grant of wear and tear allowances. The allowance will be calculated at the applicable rateto aggregate expenditure incurred on assets within a particular group on a declining basis.Under the Corporation Tax Act, tax credits are available to special classes of companies as set out in the

following paragraphs. The status of the Companies is approved by the Minister of Finance and the

Company is registered with the Evolving Tecknologies and Enterprise Development Company Ltd. which

issues a certificate of registration to the applicant.

Approved Small Company

An approved small company is exempt from payment of Corporation Tax for a period of five (5) years

commencing 1st January, 2006. In order to qualify, the company:

y Must be locally owned and controlled (nationals must beneficially own shares carrying more thanone half of the voting power in the company and have the right to receive more than one half of thedividends or capital distribution);

y Must have machinery, equipment and working capital the value of which does not exceed TT$1.5million;

y If incorporated on or after January 8, 1988 must not be the result of the splitting or the reconstructionof an existing company;

y Must not have as a shareholder any other company holding shares either directly or indirectlythrough its nominees;

y Must maintain accounts audited by a member of the Institute of Chartered Accountants;

y Must have potential for creating permanent jobs;

y Must have at least five (5) permanent employees;

y Must make optimum use of locally produced raw materials.


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Application is made in writing to the Business Development Company Limited.

Regional Development Area

An exemption from Corporation Tax for a period of five (5) years commencing 1st January, 2006 isavailable to an approved company carrying on business in a regional development area. To qualify, the

company must: be incorporated in Trinidad & Tobago on or after 8th January, 1988 and be resident in Trinidad &

Tobago;

be locally owned and controlled, and no other company holds more than 25% of the issued share

capital either directly or indirectly through its nominees;

carry out its operations in an area designated to be a regional development area, and produce

manufactured goods or industrial services of which at least 75% are produced in the regional

development area.

hold at least 75% of its fixed assets in the development area;

employ 20 or more workers of whom at least 75% work in the regional area, and receive more than

60% of the company's total payment in respect of all wages and salaries.

A company which satisfies the criteria may apply in writing to the Minister of Finance. A listing of theRegional Development Areas is available.Approved Activity Company

An exemption from Corporation Tax for a period of five (5) years commencing 1st January, 2006 is also

available to an approved activity company. To qualify, the activity must be capable of:

y earning hard currencies or effecting savings of foreign exchange;y creating a significant number of permanent jobs or offering prospects for future expansion;y stimulating technological development or developing new and modern industries;y making efficient use of local raw materials.

To qualify as an approved activity company, the company must:

y Be incorporated in Trinidad and Tobago on or after 8th January, 1988 and be resident in Trinidad andTobago only;

y locally owned and controlled and no other company holds more than 25% of the issued sharedcapital either directly or indirectly through its nominees;

y not be formed by the splitting or the reconstruction of a company already in existence;y employs more than ten persons;y be engaged in an activity classified as an approved activity and the receipts from that activity must

exceed 75% of the gross receipts in a year of income; and

y operates a system of accounts approved by the Tourism Development Company.

Application is made to the Minister of Finance. A listing of approved activities is available.

Incentives to Hotel and Tourism

IndustriesWith a view to encouraging the development of the hotel industry in Trinidad & Tobago and to stimulatetourism development generally, the Tourism Development Act provides incentives to both Hotel Ownersand Hotel Operators.


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A summary of the major incentives are:

y Tax exemption for a period not exceeding seven (7) years in respect of profits from an approvedtourism project.

y A tax exemption on profits derived from the initial sale of a villa or condominium, or the site of a villaor condominium that forms part of an Integrated Resort Development which is an approved tourism

projecty Carry over of losses arising out of the operation or renting of an approved tourism project during the

tax exemption period. These may be set off against future profits of the operator or owner.

y On an Order from the Minister, a tax exemption on interest received on an approved loan for anapproved tourism project for the period of the loan or 7 years, whichever is the lesser.

y Customs duty at the rate of 10% where a licence is obtained for importation of vehicles under theAct.

y Customs and Excise Duty Exemption on building materials not otherwise exempt, and articles ofhotel equipment to be used exclusively in connection with construction and equipping of a hotelproject.

y An order by the Minister of Finance that the interests received on an approved loan for a period notexceeding 7 years ( or the period of the loan , whichever is the lesser period) , is exempt from tax.

The details of the incentives must be gleaned from a study of the legislation. It should be noted that thereare specific investment criteria to quality for incentives under the legislation. Some areas of tourism arespecifically reserved for nationals. Some of the areas of investment are:

Type of Tourism Project Minimum Capital Expenditure Accommodation facility $18,600,000Marina, Boatyard $18,600,000Recreational Space $1,550,000Convention Centres, Shopping Facilities $6,200,000Historical Landmarks, Heritage Sites $6,200,000Theme Parks/Cultural Centres $31,000,000

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) or to the TobagoHouse of Assembly (if the project is situated in Tobago), together with a proposal for the tourism projectcontaining information as prescribed by the Act. Note that in order to obtain benefits as an approvedtourism project, the project shall:

y have a minimum capital expenditure as outlined in the Act;y be constructed or undertaken primarily for use in the tourism industry; andy be available on a continuing basis for use in the promotion of Trinidad and Tobago as a tourist

destination.

Investment in the Oil Sector

Under the Petroleum Profits Tax several incentives are available, including:

y Initial allowance on tangible expenditure of 20%y First year allowance on tangible expenditure of 20%y Annual allowance on tangible expenditure of 20%y Expenditure on development dry hole shall with the Ministers approval be written off in the financial

year that the dry hole is plugged and abandoned.

y Workover allowances of 100%.


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y Heavy oil allowance - 100% of capital expenditure on drilling wells.These allowances are claimed on the tax returns.

Concessions under the Income Tax (In Aid ofIndustry) Act

Under the Income Tax (In Aid of Industry Act), the annual allowance of 20% is to be calculated on astraight 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:

y Initial allowances of 10% of the expenditure on erection of buildings and structures for industrialpurposes.

y Initial allowances of 75% on purchase of plant and machinery reduced in certain industries to 20%.y Annual allowances equal to 1/50th of the expenditure on building structures or 1/20th of the

expenditure where a person carries on petroleum operations under licence issued after 1st January,

1970.

y Annual allowances of a reasonable amount for wear and tear on plant and machinery.y Oil refineries - annual allowances calculated by the manufacturer on 120% of the expenditure.y Investment allowance for capital expenditure in respect of production business on land equal to 150%

of the expenditure, that is, 40% in year 1 and 20% in the following five years.

These allowances are claimed on the tax returns.

Import Duty Concessions

Full exemption from Customs Duties is available to an applicant who holds a licence from the Minister for

imports of Machinery and Raw Materials in the following sectors:

y Approved Industryy Approved Agriculture, Livestock, Forestry and Fisheriesy Approved Hotely Approved Mining Purposesy

Other approved purposes e.g. sports and recreational activities for the tourism sector.

Cabinet approval is required for full exemption, and application is made to the Permanent Secretary,

Ministry of Finance.

In the Manufacturing/Assembly sectors, partial exemption from Customs Duties is available for imports as

follows:

y Machinery and Equipment - Free or 25%y Processing Raw material inputs - 0%y Parts for assembly - 5%Exemption from Import Surcharges is available on raw materials, intermediate goods, packaging

materials and other inputs 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.

Export Incentives

Exporters, targeting countries other than Caricom countries, can benefit from the following incentives:

y Non-taxable Market Development grant up to the equivalent of 50% of new market development cost(not applicable to market development in foreign investors country of domicile). Recipients of this grant


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must meet the criteria set out by the Export Development Corporation which awards the grants.y Tax deductions of up to 150% of actual promotional expenses in foreign markets (applicable only to

companies incorporated and resident in Trinidad & Tobago). The allowance is limited to the creation or

expansion of a foreign market.'Free Zones

The Free Zones Act 1988 (as amended in 1995) established the Trinidad & 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 100% exempt from:

y Customs duties on capital goods, spare parts for machinery and raw materials for use in theconstruction and equipping of premises and in connection with the approved activity.

y Import and Export duties, taxes or licensing requirements.y Land and Building Taxes.y

Fees forW

ork Permits.y Foreign currency or property ownership restrictions.y Corporate, capital gains, withholding and value added taxes.y Duties on vehicles for use only within the Free Zone.

Other benefits include:

y Exemption from import licensing, or where goods are being shipped other than to Trinidad andTobago, an exemption from export licensing;

y Exemption from income tax, corporation tax, business levy where:i. the approved enterprise is engaged in the construction, sale, lease, rental and management

of a free zone as an approved activity;ii. the approved enterprise is engaged in manufacturing in a free zone, or engaged in activities

involving international trading in products, including products originating in countries which aremembers of the Caribbean Common Market;

iii. the approved enterprise is engaged in exporting services from free zone to a territory otherthan Trinidad and Tobago

y Exemption from withholding tax on profits of a branch, dividends and other distributions arising fromactivities in the free zone, remitted or deemed to be remitted by an approved enterprise to a nonresident;

y Exemption from the requirements of the Foreign Investment Act where (i) a person is seeking toregister a company to be established in a free zone as an approved enterprise or (ii) a person investsin an approved enterprise established in a free zone or holds interest in land in a free zone.

Investment opportunities include:

y Development and operation of Free Zones.y Manufacturing (including downstream petrochemicals) for export.y International Trading in Products.y Provision of Services for export (for example, Information Processing and Financial services).

Application to operate in a Free Zone is made on specified forms to the Trinidad & Tobago Free Zone

Company (the Company). After recommendation by the Company, the Minister may by Order designate

an area a Free Zone, the limits of which are defined in the Order.


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Fiscal Incentives Act

All incentives available under the Fiscal Incentives Act were practically curtailed when the Act was

amended in 2007 to restrict its application only to enterprises which had been granted benefits under the

Act prior to 1st January, 2008.

Incentives to Invest in Trinidad & Tobago

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