Pay-As-You-Earn Tax also known as PAYE is deducted from employment income under the PAYE system. When an employee is paid, the employer is required to withhold tax from their salary, benefits and wages above the employee’s personal allowance, and remit to the Barbados Inland Revenue by the 15th of the month following the month in which the deduction was made. Such benefits as mentioned above include but are not limited to housing benefit and housing allowance, car benefit, school fees and cost of living allowance.
At the end of the year the employer is required to provide the employee with a TD slip of the income earned and PAYE deducted during the year. Employees use these TD slips when completing their income tax return.
The Minister of Finance in delivering his Financial Statement and Budgetary proposals in August 2013 has put into effect a temporary Consolidation Tax on the Gross Income of individuals from 1 September 2013. When an employee is paid, the employer is required to withhold this tax from their salary, wages, payment in lieu of termination notice, bonus, vacation pay, tips and gratuities, director’s fees, management fees, allowances and any other payment made in cash or in kind, and remit to the Barbados Inland Revenue by the 15th of the month following the month in which the deduction was made. Penalties and interest would apply for the late payment of tax.
The categories of income and applicable rates are as follows:
|Total Gross Income of Individuals||Rate of Tax on Total Gross Income|
|$50,000 – $75,000||0.5%|
|$75,001 – $100,000||1%|
|$100,001 – $200,000||2%|
|$200,001 and over||3%|
National Insurance Registration
All employers are required to register with the National Insurance Office in order to obtain a registration number which is used when submitting their schedules on a monthly basis. To register, each company must complete the Employer’s Registration Form and submit it along with a certificate of incorporation, articles of incorporation, names of directors and/or a certificate of registration from the Corporate Affairs and Intellectual Property Office. The name of the Manager/Managing Director should also be stated on the Employer’s Registration Form.
Who Pays National Insurance?
All persons engaged in employment must be insured under the National Insurance and Social Security Act, Cap. 47. Section 12 of the Act states that every person who is over 16 years of age and under pensionable age and is gainfully employed in the island under a contract of service must be insured. Section 14 of the Act states that all persons in insurable employment (regardless of age) shall be insured against personal injury caused by accident arising out of and in the course of such employment. Employed persons over pensionable age are therefore to be insured for employment injury benefit. Contributions must be paid in respect of each employee regardless of nationality and regardless of whether the employee is employed on a full-time or part-time basis.
Employers, on employing any person, except in a case where other arrangements have been made with the approval of the National Insurance Board, should obtain from the employee his National Insurance card in order to verify and enter the National Insurance number in the employee’s records. In a case where the employer has not obtained the National Insurance card from the employee within seven days of employment, the employer must obtain the National Insurance number of that employee from the National Insurance Office within the next seven days.
Making the Deduction and Submission of Schedules
Under the National Insurance legislation the employer is entitled to recover the employee’s share of the contribution by deduction from his wages for the period for which the contribution is payable up to a maximum insurable earnings of $4,360 per month and $1,006 weekly. If the employer fails to make these deductions at the time the wages are paid, he is still liable for the entire contribution and has no right at a later date to deduct the employee’s share of the contribution for any earlier period. However no deductions are to be made when an employee’s earnings are less than $21.00 per week or $91.00 per month.
Every employer is required to maintain a record of wages paid to employees. At the end of the month the employer should total the earnings and contributions for the month and make a single payment covering both employer and employee contributions for all the employees. The payment should be made within 15 days after the end of the month. When the 15th of the month falls on the weekend, the payment must be made on the following business day. Any employer who deducts, recovers or attempts to recover the employer’s share of the contribution from the employee is guilty of an offence.
The employer should pay contributions for the period during which an employee is on holiday and receiving remuneration of twenty one dollars ($21) or more, whether such remuneration is paid before, during or after the holiday.
Contributions can be submitted manually, that is, dropped off at the National Insurance Office, or they can also be submitted electronically. Manual submissions can be computerised or hand written, however special permission must be granted by the Director of National Insurance to submit computerised schedules prior to submission.