Main Features:

1. Provides for a Basic Allowance of $25,600 and,

2. Provides for a second Basic Allowance of $19,600

3. Effectively exempts from Income Tax all earnings $26,000 and under

4. Increases the Business Tax rate for Electricity Service Suppliers

Act No. 13 of 2010

PAYE changes Any resident employed person who earns up

to $26,000 per annum is entitled to a Basic Allowance of $25,600.00

In addition, that person is entitled to a Standard Tax Deduction of $100.00 which represents $400.00 of taxable income.

In total, annual incomes up to $26,000.00 are exempt from Income Tax, with effect from 1st January 2010.

Act No. 13 of 2010

$26,000.00 per annum translates to:

$72.22 per day $500.00 per week

$1,083.33 semi-monthly $1000.00 Bi-weekly $2,166.67 Monthly

Act No. 13 of 2010

Please Note! Section 5 (1) (b) of the Income & Business Tax Act imposes tax on :

“…the gains or profits from any employment including the estimated annual value of any quarters or board or residence or any other allowance granted in respect of employment whether in money or otherwise…”

Act No. 13 of 2010

In Computing tax due on the earnings of an employee, an employer is required to

establish Gross Taxable Earnings

which are:

Cash Received + Taxable Allowances

Act No. 13 of 2010

Taxable Allowances include:

Salary in lieu of vacation Vacation Grant exceeding a month’s salary Board and Quarters Rent Free or Subsidized Housing Payment of Utilities Personal Use of Employer’s Automobile Medical & Dental contributions made by the Employer Gifts Holiday Trips and prizes in recognition of performance Acting Allowances Bonuses Tips Directors’ Fees

Act No. 13 of 2010

Non-taxable Allowances

Uniform & Special Clothing Use of Recreational Facilities Transportation Passes Passage or Vacation Grant of less than a

Month’s Salary Loans- where arms-length and repaid within a

year Discounts on Merchandize Removal and Dislocation Expenses Reimbursement of Expenses attributable to

the Employer Severance (Refer each case to Tax

Department)

Act No. 13 of 2010

Basic Deductions

Anyone whose total income does not exceed $26,000…the Basic deduction is $25,600

All others in excess of $26,000…the Basic deduction is $19,600.

Act No. 13 of 2010

Examples

If an employee makes $450.00 weekly, or $23,400 annually… his Basic Deduction is $25,600.00

If an employee makes $525.00 weekly or $27,300 annually…his Basic Deduction is $19,600.00

Act No. 13 of 2010

Examples continued…

If an employee makes $450.00 (cash) but has taxable benefits that exceed $50.00 per week, his Basic Deduction would be $19,600.00

If an employee makes a constant salary of $450.00 per week but has several episodes where he makes overtime totaling in excess of $2,600.00 for the rest of the year, he would get a Basic Deduction of only $19,600.00

If PAYE deductions are made only at the time when he exceeds the $450.00 per week (i.e. when he earns OT) he runs the risk of having arrears for all the previous paydays, where no PAYE deductions were made.

Act No. 13 of 2010

Pay Date Salary Earned OT / Extra Payment Total Earnings Tax withheld

January 2,000.00 0.00 2000.00 0.00

February 2,000.00 200.00 2,200.00 133.51

March 2,000.00 0.00 2,000.00 0.00

April 2,000.00 400.00 2,400.00 183.51

May 2,000.00 300.00 2,300.00 158.51

June 2,000.00 0.00 2,000.00 0.00

July 2,000.00 0.00 2,000.00 0.000

August 2,000.00 0.00 2,000.00 0.00

September 2,000.00 500.00 2,500.00 208.51

October 2,000.00 200.00 2,200.00 133.51

November 2,000.00 0.00 2,000.00 0.00

December 2,000.00 800.00 2,800.00 283.51

Total 24,000.00 2,400.00 26,400.00 1,101.06

Act No. 13 of 2010

John Q Example Continued:

Total Earnings for 2010 $26,400.00Basic Deduction for 2010 ($19,600.00)Chargeable Income for 2010 6,800.00Tax at 25% 1,700.00Less Standard Tax Deduction (100.00)Net Tax Payable for 2010 1,600.00Tax Withheld at Source 1,101.06

Tax arrears 498.94

Act No. 13 of 2010

Pay Date Salary Earned OT/ Extra Payment Total Earnings Tax withheld

January 2,000.00 0.00 2000.00 83.51

February 2,000.00 200.00 2,200.00 133.51

March 2,000.00 0.00 2,000.00 83.51

April 2,000.00 400.00 2,400.00 183.51

May 2,000.00 300.00 2,300.00 158.51

June 2,000.00 0.00 2,000.00 83.51

July 2,000.00 0.00 2,000.00 83.51

August 2,000.00 0.00 2,000.00 83.51

September 2,000.00 500.00 2,500.00 208.51

October 2,000.00 200.00 2,200.00 133.51

November 2,000.00 0.00 2,000.00 83.51

December 2,000.00 800.00 2,800.00 283.51

Total 24,000.00 2,400.00 26,400.00 1602.12

Recommended Solution

Act No. 13 of 2010

John Q Example Recommended Solution Continued:

Total Earnings for 2010 $26,400.00Basic Deduction for 2010 ($19,600.00)Chargeable Income for 2010 $6,800.00Tax at 25% $1,700.00Less Standard Tax Deduction ($100.00)Net Tax Payable for 2010 $1,600.00Tax Withheld at Source $1602.12

Tax Credit $2.12

Act No. 13 of 2010

Basis of the proposed Solution:

The periodic salary/wage is looked at to determine whether the threshold has been crossed.

No tax is withheld if under the threshold. At the end of each month, a cumulative total of

earnings is run to determine if the cumulative threshold has been crossed or might be crossed.

Tax is withheld discretionally, with the employees consent, based on the previous tax withholding formulas.

Act No. 13 of 2010

The points at which it is suggested that the employer use the cumulative approach:

Actual Suggested Daily $72.22 $67.00 Weekly $500.00 $450.00 Bi-weekly $1000.00 $900.00 Semi-monthly $1,083.33 $1,000.00 Monthly $2,166.67 $2,000.00

The Employer is encouraged to review its history of extra payments to employees: i.e. when bonuses, OT or taxable benefits are paid and booked.

Act No. 13 of 2010

Other Matters for Improved Compliance

Re-registration issues(Employers are reminded to request TIN’s for each employee. Please access the Department’s website at incometaxbelize.gov.bz to download form).

Use of social security cards to clarify TIN Importance of TIN in speedy process of refunds Bank account information for processing of refunds Other matters

Act No. 13 of 2010

Thank You.

Questions Please.

Act No. 13 of 2010