Discover employer and employee tax responsibilities in Tonga
Employers have several tax responsibilities, including the deduction of Pay As You Earn (PAYE) from employee wages and salaries if applicable. The rates for PAYE are graduated based on income level. PAYE applies to standard employment income, including wages, salaries, and benefits provided to employees. PAYE deductions must be remitted to the Ministry of Revenue & Customs on a monthly basis, accompanied by Form 7. Payments are due within 14 days of the end of each month.
Employers must also register with TNPF and contribute on behalf of their employees. Both the employer and employee contribute 5% of the employee's annual salary (up to a maximum threshold). TNPF contributions apply to all registered employees. TNPF contributions must be remitted on a monthly basis to the Tonga National Provident Fund.
In addition to PAYE and TNPF contributions, businesses may have to pay import duties on goods brought into Tonga for commercial use. Excise taxes may also be levied on certain goods manufactured or sold within Tonga.
In Tonga, the income tax system for employees is relatively straightforward.
PAYE withholding is a type of income tax that applies to all employees with taxable income. It is calculated based on a progressive tax system, meaning that those who earn more pay a higher percentage. Unlike some other countries, Tonga does not allow employees to claim deductions for work expenses and the like when calculating income tax. Instead, gross income is used for PAYE calculations.
The TNPF contributions are mandatory retirement savings contributions. All registered employees are required to participate in the TNPF. The calculation method for these contributions is that employees contribute 5% of their annual salary, up to a maximum threshold, to the TNPF.
Tonga operates a Value-Added Tax system known as the Consumption Tax (CT). The standard CT rate in Tonga is currently 15%, which applies to most supplies of goods and services within the country.
Certain categories of services are exempt from CT in Tonga. Key exemptions include:
Businesses that supply taxable goods and services exceeding a specific turnover threshold must register for CT with the Ministry of Revenue & Customs. CT returns are generally filed on a monthly basis, accompanied by Form 9. CT payments are due within 14 days of the end of each tax period.
The Tongan government provides a variety of tax incentives to stimulate investment and the growth of priority sectors. These incentives are designed to make it more appealing for businesses to operate within the country, and they come in several forms.
The eligibility for these tax incentives often depends on the specific sector in which the business operates, as well as the size and nature of the investment. The key sectors that are typically targeted for these incentives include:
The process for applying for these tax incentives is as follows:
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