Pay-As-You-Earn (PAYE)

Tags: Pay-As-You-Earn, PAYE

The Pay-As-You-Earn System (PAYE) was introduced in Trinidad and Tobago in 1958. The legislation relating to its operation is contained in the Income Tax Act, Chap. 75:01, and the Income Tax (Employment Regulations 1957 (Act 77/57) as amended by Income Tax Act 13/68; Government Notice 76/76 and the Income Tax (Employment) (Amendment) Regulations, 1989, the system entrusted responsibility on the employee, employer and the Board of Inland Revenue.

P.A.Y.E. is not a method of assessment of Income Tax. It is the system by which tax is withheld from emolument Income (The PAYE System). Therefore it is necessary for the employee to submit a TD 1 Form to the employer.

Responsibilities of the Employee

  1. Submit TD 1 Form to the Employer

    To ensure the correct amount of PAYE is deducted from emolument income, each employee must submit a TD 1 Form to his employer –

    • The day on which he/she takes up employment

    • Within seven (7) days of a change in allowable deductions

    • When required to do so by the Board of Inland Revenue

  2. Submit TD 1 Form for Board of Inland Revenue Approval

    It is the responsibility of the employee to ensure that the Board of Inland Revenue approves his/her TD 1 Form, where necessary.

  3. Submit BIR File Number to Employer

    • Each employee must give his/her Board of Inland Revenue (BIR) file number to the employer.

    • Where the employee does not have a file number, an application for one must be completed using the application for BIR Number form together with a copy of a valid ID and a job letter or TD 4 Certificate (or completed return). Non-nationals must also submit Work Permit, CSME Certificate or Residency certificate together with their application.

    • These are submitted for processing at the Registration Unit, 4th Floor, IRD Tower, Government Campus Plaza, 2 – 4 Ajax Street, Port of Spain.

N.B. Each employee should ensure that –

  1. He/she obtains a TD 4 certificate (original and duplicate) from his/her employer on or before the last day of February following the year of income; and

  2. The correct amount of tax is deducted from his/her salary/wages.

Responsibilities of the Employer

  1. Deduct taxes from emoluments

    The employer has the responsibility to deduct taxes from the emoluments (salary, wages, etc.) of his employees in accordance with the P.A.Y.E. Regulations each time a payment is made – weekly/fortnightly/monthly. The employer should ensure that he receives a TD1 Form from the employee to accurately determine the amount of tax to be deducted.

  2. Remit taxes to Board of Inland Revenue

    The total amount of taxes deducted from the emoluments of employees must be remitted to the Board of Inland Revenue using the PAYE/Health Surcharge Monthly Return on or before the 15th day of the month following the month in which the deductions were made (eg. Deductions made in January must be remitted by the 15th February).

    An employer who fails to deduct and remit the amount deducted from his employees, after the statutory date will be liable to –

    1. *A penalty of 25% of the deduction or $40.00 whichever is greater and interest on both the amount deducted and the penalty at the rate of 20% per annum from the due date to the date of payment.

    2. A fine of thirty thousand dollars ($30,000.00) or imprisonment for two (2) years or both, upon summary conviction.

  3. Issue Pay slips

    The PAYE Regulations require the employer to give a statement of emoluments paid and the taxes deducted for each pay period (pay slips).

  4. Submit PAYE/Health Surcharge Monthly Return

    The employer is required to submit the monthly return when remitting the taxes deducted.

  5. Issue TD.4 Certificates

    At the end of the year during which tax was deducted (including Health Surcharge), but no later than the last day of February of the following year, the employer must:

    1. Issue the original and one (1) copy of the TD.4 Certificate to each employee showing total emoluments paid during the year and the total tax and other amounts deducted;

    2. Forward to the Board of Inland Revenue one (1) copy (triplicate) of the TD4 Certificate of each employee and TD4 Summary (original & duplicate) showing the total emolument paid and the total tax deducted during the year (see page 14). Where applicable, the employer is also required to issue IT76 Supplementary and Summary (see page 18). The relevant forms may be obtained from the P.A.Y.E. Section.

    3. Keep for his records a copy of each TD4 Certificate; TD4 Summary; IT 76 Supplementary; IT 76 Summary.

  6. Keep records of employees’ earnings

    The employer must keep records of employees’ earnings and tax deducted therefrom, and make them available for inspection by the Board, (Penalty applicable for non-compliance $15,000 and/or 2 years imprisonment).

Responsibilities of the BIR

  1. Provide Tax Deduction Tables and Instructions for ensuring correct deduction of taxes.

  2. Provide literature and guidelines to ensure the proper administering of the system.

  3. Offer assistance whenever necessary or requested.