Solomon Islands

In Solomon Islands, employers shoulder significant tax responsibilities, encompassing payroll taxes, social security contributions, and corporate income tax.

PAYE (Pay As You Earn)

Employers are obligated to deduct PAYE tax from employee salaries and wages each month, remitting it to the Inland Revenue Division (IRD) by the 15th of the following month. A monthly summary form (IR9) must accompany the payment. Furthermore, employers must issue each employee an annual certificate (IR2) by January 31st, detailing the total tax deducted and paid to the IRD during the previous year. A copy of all IR2 certificates should also be submitted to the IRD by the same deadline. The tax rates are progressive, increasing with income levels after the initial tax-exempt threshold.

Social Security Contributions

Employers must contribute 7.5% of each employee's monthly salary to the National Provident Fund (NPF). They are also responsible for deducting the employee's 5% contribution from their salary and remitting it to the NPF.

Corporate Income Tax

Resident companies in Solomon Islands face a corporate income tax rate of 30%, while non-resident companies are taxed at 35%. Estimated tax payments are due quarterly on the 20th of March, June, September, and December. The annual corporate income tax return, along with any remaining tax balance, must be filed by March 31st for companies with a December 31st year-end.

Other Taxes and Compliance Requirements

Additional taxes employers should be aware of include Goods Tax (10% for domestic goods, 15% for imported goods) and Sales Tax, both due monthly. Employers must also comply with various filing and reporting requirements, including monthly PAYE summaries and annual employee tax certificates. Penalties are applied for late filing and payments. Further information and specific details regarding tax rates, thresholds, and deadlines can be found on the Inland Revenue Division (IRD) website: www.ird.gov.sb.

In the Solomon Islands, employee tax deductions are primarily handled through the Pay-As-You-Earn (PAYE) system, where employers deduct income tax directly from employee salaries and wages. Several other deductions and exemptions influence an employee's final tax liability.

PAYE Income Tax

• Taxable Income: Includes salary, wages, overtime, leave/sick pay, commissions, bonuses, allowances, and non-cash benefits such as housing.

• Tax Rates for Individuals: As of 2025:

  • $1 to $15,000: 11%
  • $15,001 to $30,000: $1,650 + 23% of the excess over $15,000
  • $30,001 to $60,000: $5,100 + 35% of the excess over $30,000
  • $60,001 and over: $15,600 + 40% of the excess over $60,000

• Example: An employee earning $20,000 annually would have a $1,650 + 23% of ($20,000 - $15,000) = $2,800 annual tax liability.

Exemptions and Deductions

• Personal Exemption: $15,080. This exemption is prorated if employment is for less than a full year.
• Interest Income Exemption: The first $5,000 of interest income from savings or fixed deposit accounts is exempt.
• Other Deductions: Alimony payments are deductible. Normal business expenses are deductible for self-employed individuals and business owners.
• Tax Incentives: Tax holidays and exemptions may be granted depending upon the nature and type of the business, often ranging from 3 to 10 years for specific industries like tourism and export-oriented businesses.

Employer Responsibilities

• PAYE Deductions: Employers must register with the Inland Revenue Division (IRD) and deduct PAYE tax from employee payments.
• Annual Certificates: Provide employees with annual tax certificates and submit copies to the IRD by January 31st.
• Example: For a fortnightly paid employee earning $769, the employer deducts PAYE using the fortnightly tax table, which incorporates the $15,080 annual exemption.

Employee Filing Requirements

• Employees generally do not need to file a tax return if the correct amount of PAYE was deducted and they have no other income sources.
• Filing is required if:
  • Income was received from other untaxed sources.
  • Income from dividends, director's fees, and interest exceeded $10,000.
  • PAYE deductions were incorrect.
• The IR20 form is used for employee tax returns.
• Refunds for overpaid tax are directly deposited into employee bank accounts.
• Notices of Assessment are issued for underpaid tax, with specified due dates.

Additional Information

• Corporate Tax: Resident companies are taxed at a flat rate of 30%, while non-resident companies pay 35%.
• Total Tax Rate: As of 2019, the total tax and contribution rate for businesses in the Solomon Islands was 32% of profit.

This information is current as of February 5, 2025, and may be subject to change. Consult with the Solomon Islands Inland Revenue Division for the latest details.

In the Solomon Islands, businesses with a turnover exceeding SBD 600,000 are generally required to register for and collect a 15% Value Added Tax (VAT) on most goods and services. As of today, February 5, 2025, the Goods and Services Tax (GST) and other taxes are still in effect, with the VAT system expected to be implemented by 2026, replacing the current 10% GST.

VAT Registration and Rates

A 15% VAT is proposed to replace several existing taxes, including import duties (excluding those on motor vehicles and excisable items), goods and sales tax, stamp duty, and accommodation levy. Businesses with annual turnovers below SBD 600,000 do not need to register for VAT but will still pay VAT on imports and purchases from VAT-registered businesses. The SBD 600,000 threshold is currently under review.

Filing and Payment

While specific details about filing requirements under the VAT system are not yet publicly available, it's expected that registered businesses will need to file regular VAT returns and remit collected taxes to the Inland Revenue Division (IRD). Currently, businesses file monthly returns for goods tax and sales tax, with payments due on the 30th of each month. Other tax obligations, such as PAYE and withholding tax, have monthly filing and payment deadlines on the 15th. Provisional tax is paid in quarterly installments.

Exemptions and Zero-Rated Supplies

The proposed VAT system will include exemptions and zero-rated supplies. Exempt supplies are not subject to VAT, while zero-rated supplies are taxable at 0%, but registered businesses can still claim input tax credits for these supplies. Examples of exempt supplies likely to be included under the VAT system are education, medical services, church groups, financial services (including life insurance), and local bus and taxi services. However, hire cars for tourists and tour buses will not be exempt.

Goods and Services Tax (GST)

• The current GST rate is 10%.

Other Taxes

• Import Duty: Rates of 5%, 10%, 15%, and 20% apply to various imported goods. Exemptions exist for certain entities and goods.
• Export Duty: Applies to specific items, including minerals (15%), shells (10% or 30%), and timber at various rates.
• Corporate Income Tax: 30% for resident companies and 35% for non-resident companies.
• Personal Income Tax: Progressive rates ranging from 11% to 40%.

It's important to note that this information reflects the current state of knowledge as of February 5, 2025. As the Solomon Islands government finalizes and implements the VAT system, additional details and regulations will likely emerge. Consulting the Inland Revenue Division (IRD) website or seeking professional advice is recommended for the latest updates and specific guidance on your business's tax obligations.

The Solomon Islands offers tax incentives primarily to attract new investors and stimulate economic growth. These incentives are granted at the discretion of the Minister of Finance and are not automatic.

Tax Incentives

• Tax Holidays: While the specifics are not detailed publicly and vary case-by-case, tax holidays (periods of exemption from corporate income tax) can be granted. These are generally aimed at significant investments contributing to national development.
• Import Duty Exemptions: Incentives often include exemptions from import duties on specific capital goods, such as machinery, buildings, and equipment. However, ancillary items may not be exempt. Building materials may also qualify for exemptions. These provisions fall under Schedules 26 and 30 of the Customs and Excise Act.
• Other Incentives: Additional incentives may be available depending on the nature and scale of the investment. These may include exemptions from other taxes or duties and are assessed on a case-by-case basis.

Corporate Income Tax

• Resident Companies: The corporate income tax rate for resident companies is 30%.
• Non-Resident Companies: Non-resident companies are taxed at a rate of 35%.

Personal Income Tax

Personal income tax rates are progressive, meaning the tax rate increases with income:

• Income up to $30,080: Exempt from income tax.
• Income over $30,080: Taxable at progressive rates from 11% up to 40%.

Application Procedures

To apply for tax incentives, investors need to submit an application to the Commissioner of Inland Revenue via the Exemption Committee. This committee includes representatives from key government ministries and technical experts. The committee reviews applications and makes recommendations to the Minister of Finance.

General Information

The Solomon Islands government is committed to promoting a fair and efficient tax environment. While tax incentives are used to encourage investment, there is a move toward creating a more level playing field for all businesses, suggesting a conservative approach to granting exemptions in the future. It's advisable to contact the Inland Revenue Division or the Ministry of Commerce, Industry, Labour and Immigration for the most current details on available incentives and application procedures. The information provided here is current as of today's date, February 5, 2025, and may be subject to change. Always consult official government sources or tax professionals for the latest legislation.