2% contractors Withholding Tax not applicable to anyone and anything

Georgetown, Thursday 30 March 2017: The Guyana Revenue Authority (GRA) wishes to set the record straight regarding the suggestion that the two percent (2%) Withholding Tax on contractor’s earnings (individuals/companies) applies to “just about anything”.

Section 39 (13) of the Income Tax Act Chapter 81:01 states that “Payments disbursed to contractors in excess of five hundred thousand dollars for a contract shall be subject to a withholding tax at a rate of two percent on every payment.”

“Contractors” as defined in Subsection 14 of the Income Tax Act Chapter 81:01, refers to a person contracting with or employed directly by an owner or an agent of the owner to supply services, goods, materials, equipment, or personnel in the furtherance of the services.”

The law which applies to payments to resident businesses, individuals and companies with written “contractual arrangements” is not applicable to regular day to day commercial activities involving the trade in goods and services. Consequently, payments such as those made by rice millers to rice farmers for paddy are not subject to the 2% withholding.

The 2% withholding tax withheld must be remitted to the Guyana Revenue Authority, and will be treated as an advance payment towards the quarterly taxes payable by the taxpayer (the person from whose payment the 2% was deducted). This results in the reduction of the quarterly payment of the individual and companies from whom the tax was withheld. Receipts will be issued by the Guyana Revenue Authority as proof that this payment was made on their behalf.

It is important to note that withholding tax is also applicable to non-resident disbursements and payments and the rates range from 10% to 20% depending on the country of residence.

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