Turks and Caicos: Domestic Taxation
In the Turks & Caicos Islands there have historically been no taxes other than import duties (at varying rates), stamp duty on transfers of real estate and some official documents, a probate duty at 2% of assets up to a maximum of $550, some travel-related taxes, and business license fees for individuals who undertake professional or business activities.
The government has assured that there are no plans to introduce an income tax, despite the emergence of a substantial revenue shortfall following the financial crisis. Instead, the interim government plans to plug the fiscal gap by introducing a value-added tax (probably at 10%) from 2013. However, both major political parties votes in February, 2013, to repeal the Value Added Tax Act. Other initiatives announced in the 2011/12 Budget include the introduction of an immediate 4% Customs Processing Fee, to be levied on all imported goods and importers; and, from September 1, 2011: a new carbon tax on electricity generators; a water sales tax on commercial customers and large residential customers; a 10% bank tax on non interest-bearing services provided by banks (replacing money transfer fees and stamp duty); and a 2.5% insurance tax on gross premiums for general insurance (excluding life and health premiums).
National Insurance contributions are paid by both the employer and the employee. However, it is the employer's responsibility to deduct or recover national insurance contributions from the employee's earnings and send the total contributions on to the National Insurance Board. Employer and employee pay 6% for salaries up to US$7,800 per month. A minimum payment of US$50 applies in all cases. Self-employed individuals either pay US$250 per month on non-disclosed income levels, or between US$50 and US$150 for disclosed income levels. Pensioners are required to contribute 2.5% on retirement benefits exceeding US$2,000 per month.
In February, 2004, the Chief Minister of the Turks and Caicos Islands, Michael Misick, announced that the jurisdiction had committed itself to implementing the European Union's Savings Tax Directive, subject to the creation of a level playing field on the issue for all offshore and onshore jurisdictions. He said: "The Government's policy is that it will comply with Article 17 (2) (ii) of the Directive and will apply a withholding tax during the transitional period on the same terms and the same conditions that apply to the Swiss Confederation, the Principality of Liechtenstein, the Republic of San Marino, the Principality of Monaco and the Principality of Andorra and in accordance with an agreement in substantially the same terms entered into by them with the European Community concerning the EU Council Directive on taxation of savings income in the form of interest payments."
The Directive did in fact come into effect on 1st July, 2005, but the TCI said that it anticipated very little reduction in business in the islands with implementation of the provisions of the Directive since it is applicable to individuals and not to corporate entities. Investments can be moved into corporate entities and investors have been advised to structure their operations to form corporate entities in the medium to long term.