P.A.Y.E

What is P.A.Y.E?

Why P.A.Y.E?

How to compute P.A.Y.E.

Responsibility of the Employer

P.A.Y.E. due dates

Do’s & Don’ts - When Completing and Submitting P.A.Y.E Remittances

The Pay-As-You-Earn System popularly referred to as P.A.Y.E. was introduced in St. Lucia in 1965.  The legislation dealing with its operation is contained in the Fourth Schedule of the Income Tax Act No. 1 of 1989, as well as Sections 65, 74, 78, 101, 131 and 132.

P.A.Y.E. is not a method of assessment of income tax, but merely a system of withholding tax from emoluments as they are paid. Therefore, although tax has been deducted by way of P.A.Y.E. from emoluments, an employee MUST nevertheless, file an Income Tax Return.

Currently every employee who earns a wage or salary of more than $481 per week or $2083 per month is liable to PAYE.

The PAYE system simply allows the employee the privilege of paying his or her taxes for the income year in twelve manageable installments rather than having to pay a large tax bill when the return is filed.

Every employee from whose remuneration tax is deductible is required to furnish his employer with a Tax Code Number. The employer shall record and utilize this number in determining the amount of tax to be deducted in accordance with the Tax Deduction Tables.  The Tax Code is dependant on the declaration made by the employee on the Tax Declaration Form (TD Form AU-1). No employee should have a tax code lower than 164M or 164F.

Under the Income Tax ( Employment ) Rules every employer shall deduct tax on the payment of emoluments to any employee. Taxable emoluments are those arising or accruing in or derived from or received in St. Lucia. Deductions from salary or wages are required to be made in accordance with the Income Tax Deduction Tables prepared by the Inland Revenue Department.

The Inland Revenue Department has the authority to adjust the tax deductions of any employee.

The Department will determine the amount to be deducted in the following cases :

a) where payment is made at other than regular weekly, fortnightly, monthly or annual intervals; (eg. Persons paid on a commission basis only)

b) in the case of casual or seasonal workers

c) where the Department decides that the nature of the emolument is such that it makes the application of the Tax Deduction Tables impracticable;

d) in the case of an employee with more than one employment

In all cases the employer will use the tax Code Number issued by the Department and refer to the Tax Deduction Tables to determine the amount of tax to be deducted at each pay period.

Where a taxpayer works for short periods and will have overpaid or will not be taxable because of the quantum of income, the approval of the Inland Revenue Department must be sought. The employer will thus be guided as to the taxes to be deducted.

The Tax Deduction Table is designed to show the tax to be deducted from employees’ emoluments. The Tables are divided into columns showing amounts of pay and the amount of tax to be deducted by reference to Code Numbers each number consisting of a number and a letter.

Example :

1. Monthly Salary $ 1500.00

Employee’s contribution to N.I.S.$ 75.00

$ 1425.00

Code Number 164M

2. Refer to “Monthly Tax Deduction”

3. Look down the left hand “Monthly Pay” column for $1,425 or next higher amount.

4. Follow this line across to Code 164M. The tax to be deducted that month is where these two columns intersect.

Where the Code Number exceeds that shown on the tables use the annual tables.

Example : Code Number 320M - Monthly Pay $7000.00

a ) Multiply pay by number of pay periods in a year i.e. $7000.00 x 12 = $84,000. In the case of monthly paid employees multiply by 12 pay periods. In the case of fortnightly paid employees multiply by 26 pay periods. In the case of weekly paid employees multiply by 52 pay periods

b) Deduct allowances according to the employee’s Code number

320 x 100 = 32,000

84,000 - 3 ,0 00 (NIC for the year) = 81,000

84,000 - 32,000 = 49,000 (chargeable income)

c) Look down the annual table and use the nearest amount in column 1 i.e. $ 49,000

Follow across to column 2 “Tax for Year” for the amount to be deducted yearly - ($10,200). The next column gives the amount to be deducted monthly. Deduct Monthly - $850

Where persons other than the owner are employed in the business, the owner (Employer) has the responsibility of administering the P.A.Y.E. System of tax deduction in respect of the employees, and shall deduct P.A.Y. E. from his employees.

The total amount deducted from the emoluments of employees must be remitted to the Inland Revenue Department by the fifteenth (15th) day of the following month in which the deductions were made.

An employer who remits the amount deducted from his employees, after the statutory date will be liable to a penalty of ten percent ( 10 % ). He will also pay interest on the total of the amount deducted at a rate of 1% per month from the date on which it was due to the date of payment.

All taxes deducted must be paid by the employer to the Inland Revenue Department on or before the stipulated date, i.e. fifteenth (15th) day of the month following the month in which the deductions were made.

Where a person ceases to carry on business, the tax must be paid within fifteen (15) days on which the last payment of emoluments was made.

The prescribed form which must accompany each payment is - The P30 / P.A.Y.E. Monthly Remittance Form.

This Remittance is posted to all registered employers by the Inland Revenue Department.

Do ensure that the monthly remittance forms are fully completed

Do ensure that the Remittance forms are signed

Do ensure that the payments are made on or before the 15th of the month, to avoid the imposition of penalty and interest

Do ensure that when the payment is late the cheque reflect the tax due, as well as the penalty and interest.

Do review your receipt to ensure that the amount paid was credited to the correct period

Do send a breakdown when making payments for outstanding periods

Do ensure that payments being mailed are sent in advance of the due date for timely receipt.

Do inform us if the tax is no longer applicable to you

Do indicate on your letter to the Department the tax type(s) you are making the payment towards.

Do ensure that ALL employees furnish a tax code and tax account number.

Do submit one remittance for each month. Should more than one payment be made, please request an account statement.

Do include the employee’s tax account number along with their name when making arrear payments on their behalf.

Don’t use white-out on the Remittance forms

Don’t change the month on the remittance forms

Don’t change the company name on the forms

Don’t photocopy the Remittance forms

Don’t fax in the Remittance Forms

Don’t submit two remittances for any one month for the same tax type

Don’t accept tax codes or tax account numbers from employees if it does not bear the Department’s stamp.

ANY PERSON WHO MAKES A FALSE DECLARATION IS GUILTY OF AN OFFENSE AND IS LIABLE ON SUMMARY CONVICTION TO A FINE OR IMPRISONMENT