Computation - Income Tax

In keeping with the new budget measures announced for 2017, the following amendments and changes as they relate to the “rate of tax” and “statutory deductions” or “free pay” for Pay as You Earn (PAYE) employees and self-employed individuals are to be effective January 1, 2017 (Year of Assessment 2018).
1. The amendment as it relates to Section 20 the Income Tax Act Chapter 81:01, now states that, “... in ascertaining the chargeable income of an individual for any year of assessment there shall be allowed a deduction of seven hundred and twenty thousand dollars or one third of the individual’s income (per annum) whichever is greater and such deduction shall be apportioned according to the individual’s earning period and allowed accordingly.”
2. The amendment as it relates to Section 36 of the Income Tax Act Chapter 81:01, states that, “The tax upon the chargeable income of every person, other than a company, shall be at the rate of twenty-eight percent of the chargeable income for every person less than one million four hundred and forty thousand dollars per annum.”
3. The inclusion of Section 36A of the Income Tax Act, Chapter 81:01 states that, “The tax on the chargeable income of every person, other than a company, in excess of one million, four hundred and forty thousand dollars shall be taxed at the rate of forty percent.”
4. Additionally, Section 16(1)(k) allows for the deduction of National Insurance contributions by Employees in ascertaining the chargeable income of the Employee.
5. Lastly, Section 2(1) of the Income Tax Act denes Chargeable Income to mean “the aggregate amount of the income of any person from the sources specified in section 5 remaining after allowing the appropriate deductions and exemptions pertaining to each source separately, and such appropriate exemptions and deductions as pertain to his aggregate income.”
As a consequence, thereof, with effect from January 1, 2017, the following applies:
A. No income tax should be deducted from the person earning lower than $762,712 (the annual threshold of $720,000 plus NIS Contribution of $ 42,712.)
B. On annual Income between $762,713 to $2,160,000 (the annual threshold of $720,000 plus the NIS Employee contribution of 5.6%: employees in this category will be taxed at 28% on the difference thereafter)
C. For persons earning $2,161,000 to approximately $2,352,000 (the annual threshold will be 1/3 of the gross earnings plus 5.6% NIS and will be taxed at 28%)
D. In category A and B above because their chargeable income ranges from $1 to $1,440,000 will be taxed at 28%.
E. For earnings in excess of $2,364,000 (the annual threshold will be 1/3 of the gross earnings plus the 5.6% NIS employee’s contribution; hence, income ranging up to $1,440,000 will be taxed at 28% and the excess will be taxed at 40%.
F. It must be noted that Self-employed persons are not entitled to NIS as part of their deduction in computing their Chargeable Income.
G. Refer to examples below with respect to the above.


PAYE Threshold for individuals earning up to $180,000 monthly or $2,160,000 annually

Pay PeriodDailyWeeklyFortnightlyMonthlyYearly
Statutory Deduction$ 1,973$ 13,846$ 27,692$ 60,000$ 720,000
Employee NIS contribution
(5.6% of Gross Income)
5.6%5.6%5.6%5.6%5.6%
Rate of TaxBalance
@28%
Balance
@28%
Balance
@28%
Balance
@28%
Balance
@28%
Gross Salary Lower than or
equal to
$5,918$41,538$83,077$180,000$2,160,000

PAYE Threshold for individuals Earning in excess of $180,000 monthly or $2,160,000 annually

Pay PeriodDailyWeeklyFortnightlyMonthlyYearly
Statutory Deduction1/3 of
Gross Salary
1/3 of
Gross Salary
1/3 of
Gross Salary
1/3 of
Gross Salary
1/3 of
Gross Salary
Employee NIS contribution
(5.6% of Gross Income)
5.6%5.6%5.6%5.6%5.6%
First $120,000 @28%$ 3,945$27,692$55,385$120,000$1,440,000
Gross Salary Lower than or
equal to
$5,919$41,539$83,078$180,001$2,160,012

EXAMPLES

PAYE INDIVIDUALS Earning up to Fortnightly for Income under $180,000 Monthly

 (A)
Fortnightly
Gross Salary
(Inclusive of All
Taxable Allowances)
$
Statutory
Deduction
N.I.S
Deduction
5.6% of A
up to
$220,000
(B)
Total
Deduction
(C)
(A – B)
Chargeable
Income (CI)
(D)
C @ 28%
Total
Tax
Payable
$50,000$27,692$2,800$30,492$19,508$19,508 *.28
= $5,462
$5,462
       
$90,000$27,692$5,040$32,732$57,268$57,268 *.28
= $16,035
$16,035
       

PAYE Individual Earning Up to $180,000 Monthly

  (A)
Fortnightly
Gross Salary
(Inclusive of All
Taxable Allowances)
$
Statutory
Deduction
N.I.S
Deduction
5.6% of A
up to
$220,000
(B)
Total
Deduction
(C)
(A – B)
Chargeable
Income (CI)
(D)
C @ 28%
Total
Tax
Payable
$63,559$60,000$3,559$63,5590NilNil
 $100,000 $60,000 $5,600 $34,400 $34,400 $34,400 *.28
=$9,632
 $9,632
       
 $180,000$60,000 $10,080 $70,080$109,920 $109,920 *.28
= $30,778
 $30,778

PAYE INDIVIDUALS WHOSE MONTHLY EARNINGS IS IN EXCESS OF $180,000 Monthly

 (A)
Fortnightly
Gross Salary
(Inclusive of All
Taxable Allowances)
$ 
Statutory
Deduction
N.I.S
Deduction
5.6% of A
up to
$220,000
(B)
Total
Deduction
(C)
(A – B)
Chargeable
Income (CI) $
( D)
FIRST
$120,000
@ 28%
(E)
Remainder
@40%
(F)
(D + E)
Total
Tax
Payable
$185,000$61,667$10,360$72,027$112,973$112,973 *.28
=$31,632
-$31,632
        
$300,000$100,000$12,320$112,320$187,680

 $120,000*

.28
=$33,600

$67680*

.40
=$27,072

$60,672

6. All employers are to ensure that the new income tax rates are implemented from February 2017 onwards.
7. Employers should note that there will be no changes to the following Forms: Form 5 and the Return of Employers of Persons Employed by them (Form 2’s). Therefore, the
current Form 5 should be utilized to report the employees’ earning, NIS and tax deducted to the Guyana Revenue Authority on or before the 14th working day of the preceding month.
8. Therefore, in February 2017, Employers will be required to make the necessary adjustments to their employees’ tax payable using the new rates of individual income tax and refund any over deduction from the employees’ income until the employee has been fully refunded the tax over deducted. The Schedule below must accompany February month Form 5 to reflect taxes over-deducted.
9. For example, if $5,000 was over deducted from an employee in January and the employees’ tax in the month of February is $10,480; then the employer must deduct the $5,000 from the $10,480, refund it to the employee and remit $5,480 to the Guyana Revenue Authority. Please note that in cases where the amounts to be refunded are in excess the month’s tax then the difference will be carried over to the next month or until it has been fully refunded to the employee.

No.Name of
Employee
Actual Deductions for
the Month of
February
Over-Deductions
(January)
(Payable to the employee)
Amount to be
Remitted as PAYE
(Payable to the GRA)
1John Brown$10,480$5,000$5,480

10. An amended Forms 5 for the month of January must be submitted to reect the new rate of tax.

11. Employers are also reminded that they are obligated by law to issue to their employees’ certificate of their earning, such as a pay slip or statement of earnings for the period

By Order of
Mr. Godfrey Statia
Commissioner -General,
Guyana Revenue Authority

Calculation for Self Employed Persons can be found HERE