Wednesday, 27 April 2016

I've been reading: "Puerto Rico, The Puerto Rico Section 936 Funds Order, 1990 "

Over the last few days in an attempt to bolster my knowledge on taxes, I was browsing  some of the treaties and Tax Information Sharing Agreements to which  Trinidad and Tobago is a party. Being one of those who start to read a book from the back to see how it ends before I start reading the book, I came across "The Puerto Rico Section 936 Funds Order, 1990 and  the Tax Information (Declared Agreement) Order 1990 between the United States of America and Trinidad and Tobago. The Tax Information Order came into effect on 9th February,1990 was called The Tax Information Exchange Agreement Act, 1989 in Trinidad and Tobago.
However one of the main points of the Puerto Rico Section 936 Funds Order is as follows:
 #2 "Withholding tax applicable to income derived from Puerto Rico Section 936 Fund investment is reduced from 30 percent to .001 per cent." While I have not checked to see if this agreement was modified or if it was "retracted," if that is what is done to agreements which may not appeal to the public any longer, if I held funds in Puerto Rico under the "Section 936 Funds Order"  or otherwise, unless there was a restriction as to the use of funds internally, I would consider doing the following:
  1. Ascertain where Puerto Rico, being defined as a territory of the USA, falls under "Avoidance of Double Taxation Treaties between the USA and other countries.  See the  link  to  and the extract from to the following article  which highlights the concepts re Section 936 Investment Order: "Puerto Rico is in worse shape than you think — and US bankers aren't helping" "Because Puerto Rico is a territory and not a state, it remains "foreign to the United States in a domestic sense." Oliver didn’t have any interest in settling the contentious topic of Puerto Rico statehood, but focused instead on how problematic it is that many state laws have loopholes on the island. ... One law that created an abundance of wealth in Puerto Rico was Section 936, a tax break that was given to businesses to encourage them to set up shop in Puerto Rico instead of moving overseas."
  2. Once the definition of the tax status of Puerto Rico is clarified (in light of "Section 936 Funds Order"), it would allow:
    • Individuals and countries to explore which set of withholding tax rates they are to use when complying with the treaties and the movement of funds into and out of Puerto Rico. This would allow them to remain tax compliant.
    • Investment choices such as the rental of land, property in Puerto Rico  as these are all business concepts which involve withholding tax and which impact on the choices which an investor can make.
  3. If there are no restrictions and the "regular rates of withholding tax" are being adhered to, then being a small investor and being in support of persons who live and reside in Puerto Rico, I would:
    • Rent the land surrounding a person's home and plant  green bananas, plantains, and fruit trees. While this would not be done on a large scale, I would export the short term and longer term crops to near by islands. If ten such properties in each area are being rented, while persons look at the returns of such a project and develop the skills needed to make this type of investment successful, this would benefit the island as Puerto Rico is located in the middle of a number of small islands and there are boats moving up and down these islands which would facilitate the movement of the goods.. Yes agriculture is labor intensive, however if I do not sell it, I can eat it, so plant what you would like to eat.... In this day and age, I am not looking at major investments as the country, being located in a tropical area in the midst of climate change, my crops would be exposed to weather forces which are relatively unpredictable. Thus I would need to manage my risks...
    • I may not have a lot of competition with this type of project in the Puerto Rico location as unlike the Cayman Islands where  because of my geographical location I am facing competition from the agriculture rich Cuba and Jamaica,
  4. Consider eco tourism, which may be impacted upon by withholding taxes. However in light of the recent Paris climate agreement it may be easier to rethink our residential choices and let certain geographical areas rest, while we look at the impact of achieving milestones as identified in the  following extract " The US, for example, has pledged to reduce emissions 26% below 2005 levels by 2015; the European Union is aiming for 45% below 2005 levels by 2030. China hopes to reach the same target by 2020. 
    It also includes provisions designed to protect the global poor, who are almost certainly going to bear the brunt of the warming sparked by the rapid industrialization of other, richer countries.
    This includes allocating funding from wealthy states to developing ones as well as committees tasked with exploring solutions to issues like the inevitability of climate refugees.( See the following link: 
  5. The story which is accessed via the link represents one of the best short term options which can impact positively on  climate/ temperature control in streets and in other areas, developing community spirit  and inculcating a sense of social responsiblility, corporate or otherwise. 

    "Food Street: Feeding off the kerbside and creating close communities

     Disgruntled over the price of a lime, two Queensland locals have started Australia's first integrated, edible streetscape in a bid to live a simple organic lifestyle of community and fresh food.
    Urban Food Street began in 2009 in the leafy green Sunshine Coast suburb of Buderim, and now acts as a blueprint for the nation to give purpose to the great Australian nature strip.
    "It started with us deciding to plant limes, and then it evolved into this notion that if we put the limes out on the nature strip people could pick a lime for whatever they need it for," graduate architect and one of the masterminds behind Urban Food Street, Caroline Kemp said."
© Jennifer Bailey

Monday, 11 April 2016

Financial Planning Tip - April 9,2016 -001 Tax - Residency 101

April 2016 would be the month, all things being equal when you can pay the final 20% on your income tax for the year of Income 2015. In keeping with the thinking of having my taxes as materially correct as possible, I will review concepts which impact on Income and the related tax. Here is my assessment #1 which is based on residency. I am using the Canadian model because of the following reasons:

  1. Trinidad and Tobago has a treaty with Canada which was set out to reduce the occurrence of double taxation. See the link which would allow you to view a copy of the treaty.
  2. The concept of residency and income impacts upon a person in a basic way on several areas:
  •  The rate of tax on which you are assessed will differ because there are different rates of tax for Income Tax and for withholding Tax
  • There is a (TTDollar sixty thousand) TT$60,000 personal allowance which is available to residents of Trinidad and Tobago. This allowance reduces the Income Tax which is liable on the Income earned in Trinidad and Tobago. Most persons would have elected to have  Pay as you earn (PAYE) deducted from their income as employees. This PAYE is remitted to the Board of Inland Revenue on your behalf, monthly. At the end of the calendar year, the information is provided to you in an annual TD4 certificate,  and a copy is provided to the Board of Inland Revenue. 
However in keeping with the concept of reviewing income, I will leave you with an extract from the Certificate in Financial Planning Education Programme which covers residency and income source.
According to Jamison Aldcorn, author of Contemporary Practices in Financial Planning (CCH/Advocis Education Programm) "Canada imposes tax on the twin basis of residency and income source. For example, Canada taxes its residents on their world wide income. It taxes non - residents on income earned in Canada"
The question therefore arises "Where do I fit in relation to income which is generated in Canada? Think: dividend income from companies which are traded on the T&T Stock Exchange whose parent company is registered in Canada; bank accounts which hold Canadian dollars, rental income from properties located in Canada.... Was tax deducted at source on the funds (income) earned over the year?
© Jennifer Bailey

Thursday, 7 April 2016

Divine Mercy Sunday in the Jubilee Year of Mercy -2016 April, 3rd

Visited the city of San Fernando via Claxton Bay!  In Claxton Bay, the road is located close to the sea shore, so that at several points along the road, one can look out and see the waves touching the shore gently as the sun rises or sets in the background. 
San Fernando, on the other hand is a city of hills, slopes and beautiful views of the sea in the distance. It is also a city of renovations in progress as seen in the Carnegie Free Library and other buildings which show restoration in progress.
There are businesses which attract cash via attractive prices and which compete with one another because of the products and markets which they serve, such as Wendy's, Royal Castle and KFC. 
These three fast food restaurants have been placed in close proximity to one another either by accident or because of the choice or preference of floor space or their proximity to Library Corner, the taxi stands and the nearby supermarket. After all, a Library will serve so many patrons, a supermarket so many and other businesses so many... 
Given that Wendy's entry into the Trinidad and Tobago fast food market was fairly recent, while Royal Castle is a local brand, having been founded in 1968 according to Wikipedia, it is possible that in San Fernando, that branch of Royal Castle was opened earlier than the other restaurants, hence their location was deliberately chosen.
With Library Corner being the centre to taxi stands  which serve various outlying areas such as Fyzabad, Marabella, there may be a need to soften and or blend the cultures and the peoples who inhabit the space to allow for more than survival and perhaps that is what was intended with the placement of these three fast food outlets!
© Jennifer Bailey