The Guyana Revenue Authority (GRA) is continuing its efforts to sensitise the general public on the various taxes it administers, so as to promote voluntary compliance.
DEFINITION OF TERMS:
The Income Tax Act does not provide a definition for Vacation allowance.
However, the number of days worked entitles an employee to vacation allowance, which differs depending on their employment status. The amount paid as vacation allowance varies from organisation to organisation and according to an employee’s rank.
Section 2 of the Income Tax Act, Chapter 81:01 defines an “employee as any person receiving remuneration and includes an officer, servant, or person holding a position of employment;
Remuneration is defined as all salaries, wages, overtime, leave pay, sick bonus, stipend, commission, or other payment of any kind for services, directors fees, retiring allowances, compensation for the termination of any contract of employment or service, any perquisites, including the annual value of any residence, quarters, board and lodging whether paid in money or otherwise, arising or occurring in or derived from or received in Guyana which are chargeable under this Act, but shall not include any salary or share of profits arising from a trade, business, profession or vacation carried on by a person either by himself or in partnership with any other person;
Section 5 of the Act which imposes the tax, also specifies allowances which are not subject to income tax.
Section 5 (b) (iiA) of the Income Tax Act states that ‘no income tax shall be payable for vacation allowance not exceeding one month’s gross salary’.
Based on the above and effective January 1, 2018, private sector employees can now enjoy vacation allowance tax-free and use it as they see fit. Additionally, private sector employees would not be required to submit proof of how the money was used.
Further, in order to ensure fairness and consistency within the tax system, vacation allowance for private sector employees is limited to one month’s salary.
The Guyana Revenue Authority will scrutinise these allowances granted by private sector employers to their employees. This will be done to ensure that there is no abuse. Employers are reminded that any other amounts paid in excess of the allowable sum should be added to the employee’s salary and taxed accordingly.
Notwithstanding the above, Section H2 of the Public Service Rules states that Public Servants on the permanent pensionable establishment are eligible for vacation leave and allowance. Further, Public Service Management Circular No. 6/1997 dated April 04, 2007 indicates that CABINET has given approval for the payment of annual vacation allowance (tax free) to:
a) Employees on the permanent pensionable establishment in April of each year by their respective Ministries, Departments and Regions.
b) Payment of vacation allowance (tax free) to contract officers to the anniversary dates of their appointments as provided for in their contract. Further, employees would not be required to apply for vacation leave to facilitate payment of vacation allowance.
Therefore, employees from all sectors can now enjoy tax-free vacation allowance.
Tax Advisory Services Section
Communications & Tax Advisory Services Division
Guyana Revenue Authority
200 -201 Camp Street
Tel: 227-6060 | 227-8222 Ext: 1201-1204