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Tax Operations Policy#9 – Payments to Non – Resident Companies: Contractors/Sub-Contractors

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Tax Operations Policy#9 – Payments to Non – Resident Companies: Contractors/Sub-Contractors

May 22, 2020

The Guyana Revenue Authority (GRA) is continuing its efforts to enhance its mission by sensitizing the general public on various issues, to ensure compliance. This policy is intended to provide a better understanding of the statutory provisions concerning payments to non-resident contractors/subcontractors.

Local businesses, organizations and individuals may employ the services and expertise of non-resident companies (as contractors/subcontractors) to perform work for reward. This reward when paid is subject to Corporation Tax (in the form of Withholding Tax).

Section 10B (1) of the Corporation Tax Act, Chapter 81:03 states “There shall be levied and paid
corporation tax (in this Act referred to as “withholding tax”) by every person on payments made by him or it or on his or its behalf to any non-resident company on account of any contract undertaking by or on behalf of that non-resident company, at the rate of ten percent (10%) of such payment made in any year of account.”

Hence, all payments to a non-resident company (who are contractor/subcontractors) for work done in Guyana are subject to Corporation Tax, in the form of Withholding Tax, at the rate of 10%.

Section 10B (1) of the Corporation Tax Act Chapter 81:03 defines a non-resident company as “…a company the control and management of whose business are exercised outside Guyana.” Consequently, the mere act of incorporation in Guyana does not make an entity resident in Guyana.

Section 10B (1) of the Corporation Tax Act states that a “company has the meaning assigned to it in Section 2 of the Income Tax Act.” Section 2 of the Income Tax Act, Chapter 81:01 defines a ‘company’ as “… a body corporate or unincorporated but does not include a partnership.”

Further, in accordance with Section 10B (8) of the Corporation Tax Act:

“Payment” means gross payment without any deduction whatsoever;

“Contract undertaking” means the supply of goods or services on the undertaking of any work for reward (whether the amount or nature of the reward is at the time of the making of the contract, fixed and agreed upon or not) under or pursuant to any contract entered into between two or more parties.

Therefore, a subcontract is said to be the supply of goods or services or any work carried out as part of a larger project;

“Goods” includes wares, merchandise, articles, chattels and things of any kind or material whatsoever; and “Work” includes any construction work, manufacture of any article or thing, and repairing, fashioning, altering, cleansing or servicing any article or thing.

Who is Responsible for Remitting the Tax?

Pursuant Section 10B (2) and (3) of the Corporation Tax Act, the business, organization or individual making the payment to the non-resident company (contractor/subcontractor) is responsible for deducting the withholding tax. The tax deducted must be remitted to the Guyana Revenue Authority within thirty (30) days from the date on which the payment was made to the non-resident company.

It must be noted that, where a payment on account of a contract undertaking is made to any office, branch or agency of any non-resident company in Guyana, the payment will be deemed to have made to the nonresident company. As such, the Withholding Tax must be deducted and remitted accordingly.

The non-resident company is required to file tax returns and may claim a credit for any taxes withheld from any contract payment made to the company or on its behalf.

Failure to Remit the Tax

Section 10B (6) provides that, if any reason the business, organization or individual making the payment or on whose behalf the payment is made fails to deduct Withholding Tax, the business, organization or individual must pay to the GRA the amount of the tax which should have been deducted initially and a penalty equal to the tax which was due.

The Commissioner-General of Guyana Revenue Authority has the power to prevent any non-resident person from leaving Guyana, if he reasonably suspects that the person is leaving Guyana with the intention of defrauding the revenue of the country.

Contact Us:
Tax Advisory Services Section
Communications & Tax Advisory Services Division
Guyana Revenue Authority
200 -201 Camp Street
Georgetown
Guyana
Tel: 227-6060 | 227-8222 Ext: 1201-1204
Email: gravat@gra.gov.gy
Website: www.gra.gov.gy

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