Ernest & Young -1998 World Wide Corporate Tax Guide

CONTENTS

At a Glance

Taxes on Corporate Income and Gains

• Corporate Income Tax
• Rates of Corporate Tax
• Capital Gains
• Administration
• Dividends
• Foreign Tax Relief

Determination of Taxable Income

• General
• Inventories
• Provisions
• Tax Depreciation (Capital Allowance)
• Export Allowance
• Relief for Losses

Other Significant Taxes

Miscellaneous Matters

• Foreign - Exchange Controls
• Debt-to-Equity Rules
• Controlled Foreign Companies
• Antiavoidance Legislation

Treaty Withholding Taxes

1. At a Glance                                                           

1. The 35 % rate applies to non-commercial companies; the 45% rate applies to commercial
   companies. For details concerning the minimum tax, see Section B.
2. This withholding tax is a final tax that applies to dividends paid to non-resident companies and individuals.
3. This tax applies to bank interest and to interest on loans secured by bonds or similar
   instruments that is paid to resident and non-resident companies and individuals. It also applies
   to interest on debts, mortgages or other securities that is paid to non-resident companies and
   individuals. Withholding tax on interest is generally a final tax for nonbank recipients. Aged or incapacitated individuals are exempt from withholding tax on interest.
4. This withholding tax is the final tax that applies to payment to non-resident companies and
   individuals.
5. See Section C.

2. Taxes on Corporate Income and Gains                                               

Corporate Income Tax. Resident companies are subject to tax on their worldwide income. A company is considered resident in Guyana if its control and management are exercised in Guyana. Non-resident companies carrying on a trade or business in Guyana are subject to tax on income derived from Guyana, regardless of where the income is received.

Rates of Corporate Tax. For the 1998 Income year, the rate of tax for commercial companies is 45%; for non-commercial companies, the rate is 35%. In general, a company is
classified as a commercial company if it derives at least 75% of its gross income from trading in goods not manufactured by it or if it is engaged in telecommunication, banking or insurance other than long term insurance.

No special tax rates apply to particular industries.

The minimum tax is 2% of turnover. It applies only to commercial companies other than insurance companies. Payments of minimum tax may be carried forward to offset corporate income tax payable in future years, but they may not reduce tax payable in any year to less than 2% of turnover.

Capital Gains. Capital Gains tax at a rate of 20% is imposed on the net chargeable gains derived from the disposal of capital assets. Gains derived from the disposal of capital assets within 12 months of their acquisition date are treated as ordinary income and are subject to corporate income tax at the normal 35% or 45% rates. Gains derived from the disposal of assets held for more than 25 years are exempt from tax.

Capital losses may be carried forward to offset capital gains for a period of 24 years.

Administration. The tax year is the calendar year. Tax is assessed during a tax year on income earned in the year of income, which is generally the calendar year preceding the tax year. The Commissioner of Inland Revenue may allow companies with an accounting year other than the calendar year to adopt their accounting year as their income year. For these companies, tax is assessed in a tax year on income earned in the income year ending in the previous tax year.

Advance tax payments are due on March 15, June 15, September 15, December 15, of the calendar year prior to the tax year. Advance payments are normally based on the preceding year’s tax liability. However, the Commissioner may require the company to calculate the payments based on estimated income for the current year.

Tax returns must be filed, and balance of tax due paid, by April 30 of the tax year.

Dividends. Dividends paid by resident companies to other resident companies and to resident individuals are exempt from tax.

A final withholding tax of 15% is imposed on dividends paid to non-resident companies and individuals.

Resident companies and individuals must include dividends received from non-resident companies in taxable income.

Foreign Tax Relief. Foreign tax relief is available under double tax treaties with Canada and the United Kingdom (for withholding rates under these treaties, see Section F).

Guyana may grant unilateral relief for foreign taxes paid in countries with tax systems and legislation similar to those in Guyana. For British Commonwealth countries, the relief is 50% of the relief that would be available if the foreign country were a treaty country.

For other countries, the relief is 25% of such available relief. The available relief is the lower of the tax rate in Guyana and the tax rate in the other country.

3. Determination of Taxable Income                                               

General. Taxable income is the income reported in the company’s financial statements, prepared in accordance with generally accepted accounting principles and subject to certain adjustments.

Profits derived on the disposal of capital assets are not included in taxable income (but see Section B for an exception to this rule).

Income derived from the export of specified products to countries that are not members of the Caribbean Community and Common Market (CARICOM) is subject to an export allowance (see Export Allowance below).

Expenses incurred wholly and exclusively in the production of income are deductible. Deductions for administrative, technical, professional or other managerial services fees paid to a non-resident company or branch may not exceed 1% of annual turnover.

Charitable donations are not deductible unless they are made under a deed of covenant.

Inventories. Inventories are valued at the lower of cost and net realizable value. Cost is generally determined using the average cost method for accounting and tax purposes, but the first-in, first out (FIFO) method is also acceptable.

Provisions. Provisions are deductible only if they relate to specific or know liabilities or todoubtful debts.

Tax Depreciation (Capital Allowances). The capital allowances granted in Guyana are described below.

Initial Allowance. Initial allowances are available for industrial buildings and structures at a rate of 10% and for plant and machinery, including mechanical equipment, at a rate of 40% The initial allowances are granted in the year of purchase and reduce the depreciable value of assets.

Annual (Wear and Tear) Allowance. Buildings that house machinery are depreciated at a rate of 5%, using the straight line method. Other assets may be depreciated using the declining balance or straight line methods. The following are the depreciation rates, which apply under both methods.

Class of Asset	Rate (%)
Aircraft	331/3
Boats	10
Buildings (housing and industrial)	5
Furniture and Fittings	10
Motor vehicles	20
Office Equipment:
Electrical	20
Other	15
Plant and Machinery	20

Office buildings and structures used for trading are not entitled to any capital allowances.

Export Allowance. Companies may deduct an export allowance if they export non-traditional products to non-CARICOM countries. Non-traditional products include vegetables, furniture, fish and plants. Products that do not qualify for the allowance include bauxite, diamonds, gold, lumber, prawns, rice, rum and sugar.

The export allowance is computed by applying a specified percentage to export profits. The following are the deductible percentages of export profits.

Export Sales as a Percentage of Total Sales

Deductible Percentage

Exceeding	Not Exceeding	of Export Profits
%	%	%
0	9.9	0
9.9	21	25
21	31	35
31	41	45
41	51	55
51	61	65
61	-	75

For the purpose of the export allowance, export sales and export profits include only those sales and profits derived from exports of products qualifying for the export allowance.

Relief for Losses. Companies may carry forward losses for an unlimited number of years, but the losses may not reduce the taxable income in any year by more than 50% or the tax payable to less than 2% of turnover. Loss carrybacks are taxed separately.

Groups of Companies. There are no provisions in the law relating to group taxation. All companies are taxed separately.

4. Other Significant Taxes                                                           

The table below summarises other significant taxes.

Nature of Tax Rate	(%)
Customs duties	10 to 75
General consumption tax, on the value added goods and services;generally applies to products of manufacturing entities that are sold in Guyana and to almost all imports; exports are exempt
Most goods and services	10 and 30
Other goods and services	5 to 50
Assets tax, on net assets; levied on worldwide assets of companies And on assets located in Guyana of non-residential companies; imposed on amounts Not exceeding G$500,000	0
Exceeding G$500,000 but not exceeding G$5 million	0.5
Exceeding G$5,500,000	0.75
Social security contributions (National Insurance Scheme), imposed on monthly earnings of up to G$ 46,000
Employer	7.2
Employee	4.8

5. Miscellaneous Matters                                                                   

Foreign – Exchange Controls. The Guyanese currency is the Guyanese dollar (G$).

Guyana does not impose foreign exchange controls. Foreign exchange is freely traced at bank and nonbank cambios (places for the exchange currency).

Debt-to-Equity Rules. There are no required debt-to-equity ratios, but foreign companies must obtain permission to borrow locally.

Controlled Foreign Companies. No specific controlled foreign company rules apply.

Antiavoidance Legislation. A provision in the law allows the Commissioner of Inland Revenue to apply the unitary system of taxation. Under this system, for a company that is part of a group, income tax is calculated by applying to the group’s worldwide profits a ratio of the company’s turnover in Guyana to the group’s worldwide turnover.

6. Treaty Withholding Taxes