Employers have several tax responsibilities, including withholding income tax from employee wages and salaries through the Pay As You Earn (PAYE) system. The rates for PAYE are progressive, ranging from 0% up to a maximum of 35%. PAYE deductions must be submitted to the Inland Revenue Division (IRD) on or before the 15th of the month following a salary/wage payment.

National Provident Fund (NPF) Contributions

The National Provident Fund (NPF) is a compulsory social security scheme. Employers are required to contribute to the NPF on behalf of their employees. The contribution rate for employers is 7.5% of the employee's gross salary. NPF contributions are due by the 14th day of the month following the month in which wages were earned.

Business Turnover Tax (BTT)

The Business Turnover Tax (BTT) is a tax levied on the gross turnover of a business. It is only applied in certain circumstances, typically where a business is not registered for Goods and Services Tax (GST). Variable rates apply, depending on the type of business activity. BTT is payable monthly, by the 21st of the month following the taxable period.

Other Employer Taxes

Depending on the nature of your business, you may also be liable for other taxes such as Goods and Services Tax (GST) and Fringe Benefits Tax (FBT). For specific information on these taxes, consult the Solomon Islands tax legislation.

Pay As You Earn (PAYE) Income Tax is an income tax withheld directly from employees' salaries and wages. All employees with taxable income in the Solomon Islands are subject to PAYE. The tax is calculated using a progressive tax rate schedule. From January 1st, 2020, the personal tax exemption threshold is SBD $30,080 annually. This means no PAYE is payable on income up to this amount.

National Provident Fund (NPF) Contributions

National Provident Fund (NPF) Contributions are a compulsory social security contribution deducted from an employee's salary. All employees in the Solomon Islands are required to contribute to the NPF. Employees contribute 5% of their gross salary directly to the NPF.

Other Potential Deductions

There are other potential deductions that may apply to an employee's salary. Union Dues may be deducted if the employee is a member of a registered trade union. Charitable Contributions may be deducted if made to approved organizations. Approval requirements should be confirmed directly with the Inland Revenue Division (IRD).

The Solomon Islands VAT Bill proposes a standard rate of 15% for most goods and services. The Bill also outlines specific exemptions and zero-rated items, potentially including financial services, insurance services, educational services, healthcare services, exports, and specific basic food items.

Proposed Filing Procedures

Should the VAT Bill be passed, businesses providing taxable services in the Solomon Islands will likely follow these general procedures:

• VAT Registration: Businesses surpassing a specified annual revenue threshold (the amount is currently under discussion) will likely be mandated to register for VAT.
• Filing Frequency: VAT returns are anticipated to be filed on a monthly or quarterly basis, depending on the size of the business.
• Due Dates: Specific due dates for filing and payment are yet to be finalized.

The Solomon Islands government offers a few tax incentives to attract investment and stimulate business activity. While not as extensive as some other countries, these incentives can be beneficial for qualifying businesses.

Investment Tax Credit Scheme

This scheme allows businesses to claim a credit against their corporate income tax liability for a portion of their qualifying capital expenditures. The incentive primarily targets investments in manufacturing activities, tourism infrastructure development, agriculture and resource development, and the establishment of new businesses in designated priority sectors. Minimum investment thresholds may apply. Businesses should contact the Ministry of Commerce, Industry, Labour and Immigration (MCILI) for detailed information and application procedures. Applications are typically reviewed on a case-by-case basis.

Import Duty Exemptions

Businesses may be eligible for exemptions or reduced rates on import duties for certain goods. Exemptions are typically granted for plant and machinery used directly in the production process, raw materials for manufacturing, and equipment for approved tourism projects. Specific criteria and eligibility requirements are outlined in the Customs and Excise Act and relevant schedules. Businesses should consult the Solomon Islands Customs and Excise Division for detailed information on applicable exemptions and application procedures.

Tax Holidays (Discretionary)

In rare cases, the Minister of Finance may grant a tax holiday to a new business considered to be of significant economic benefit to the Solomon Islands. The qualification criteria are highly discretionary and specific. Businesses would need to present a compelling case demonstrating substantial investment, job creation, and positive economic impact. There is no formal application process. Interested businesses should contact the Ministry of Finance directly to discuss the possibility of a tax holiday.

Additional Considerations

Municipalities may offer additional tax breaks or incentives to attract businesses to their specific areas. Contacting the relevant municipality is recommended to explore these possibilities. The Solomon Islands has free trade agreements with several countries, which can offer reduced tariffs for imports and exports.