SURINAME
Table of Contents
ECONOMIC OVERVIEW
Suriname, a small country in South America with around 623,000 people, boasts abundant natural resources that drive its economy. Mining, particularly gold extraction, plays a significant role, contributing heavily to public revenue and exports. However, this heavy reliance on natural resources leaves Suriname susceptible to external economic shifts. Between 2001 and 2014, the country experienced robust economic growth averaging 4.4%, largely attributed to favorable commodity prices. This growth propelled Suriname to become one of the fastest-growing economies in Latin America and the Caribbean, with GDP per capita reaching US$9,850 in 2014 and a noticeable reduction in poverty rates. Suriname levies a variety of taxes to generate revenue and support public services. These include income tax, dividend tax, wage tax, social security contributions, wealth tax, rental value tax, and other direct taxes. Additionally, there are indirect taxes such as stamp duty, turnover tax, and import duties. This diverse tax system ensures that both individuals and businesses contribute to the national budget, providing essential funding for government programs and infrastructure development.
Income tax- Corporations
Corporations in Suriname are subject to a 36% corporate income tax on their profits, and distributions to shareholders are also taxed. However, certain distributions can qualify for a participation exemption, eliminating double taxation. Both resident and non-resident corporations are subject to corporate income tax. Resident status applies to corporations incorporated under Surinamese law or effectively managed in Suriname. Resident corporations are taxed on their global income, including profits, gains, portfolio investments, and capital gains. Taxable income is calculated based on all profits and gains. Non-resident corporations are taxed on specific income items if derived from activities in Suriname, such as income from a permanent establishment, immovable property, or rights to profits managed in Suriname. A "permanent establishment" is defined as a fixed place of business meeting certain criteria, including having a distinct and permanent presence for at least six months. Exploration activities related to natural resources are always considered to be conducted through a permanent establishment in Suriname.
Calculation of annual profit
Profit for corporate income tax purposes encompasses all gains from business activities, regardless of their form. Calculating annual profit should adhere to sound business practices. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) can be utilized unless specified otherwise by tax laws. Foreign corporations operating in Suriname typically apply the GAAP or IFRS of their home country. Expenses related to business operations are usually deductible, except for head office or group management fees, which must be determined at arm’s length and exclude stewardship expenses. Inventory valuation methods such as LIFO and FIFO are both permissible. Depreciation of business assets should be based on their estimated useful life minus any residual value, with options including straight-line or declining balance methods. Corporate income tax liability is assessed on the remaining profit after deducting business expenses and potential loss relief. Both resident and non-resident corporations with a Suriname branch face a fixed tax rate of 36%.
Value-added tax (VAT)
The standard VAT rate in Saint Lucia stands at 12.5%, with certain goods and services subject to a 0% rate. Notably, the hotel sector and related services are taxed at 10%, with a reduced rate of 7% applicable for tourism accommodation services starting from December 1, 2020. Businesses with annual sales turnover below 400,000 East Caribbean dollars (XCD) are not required to register for VAT. This threshold is based on the taxpayer’s annual sales turnover. Certain supplies are subject to a VAT rate of 0%, including goods for export, duty-free shop sales, fuel, water, and electricity. Additionally, specific goods and services are exempt from VAT, such as domestic residential rental, educational, financial, insurance, and medical services, as well as local transportation services and certain food items. Import duty on medical supplies was waived from May 1, 2012, to April 30, 2016, with no official end date announced. Prescription drugs are currently exempt from VAT. To expedite VAT refunds, the government has established a dedicated VAT Refund Account as per the Financial Administration Act.
Relief of tax losses
Tax losses accrued within the initial three years of a company’s establishment can be carried forward indefinitely. Losses incurred in subsequent years are eligible for carryforward for up to seven years. However, there is no provision for carrying losses backward.
Filing requirements
Corporations are required to submit their final income tax returns within six months following the conclusion of the fiscal year (ending on June 30th), while individuals must file theirs within four months after the fiscal year (ending on April 30th). Any variations between the provisional and final income tax returns must be settled upon filing the final return. Corporations must submit their provisional income tax returns by April 15th of the current year or within two and a half months after the start of the fiscal year. These provisional returns must reflect a taxable result at least equal to the most recent final return. Income tax payments based on provisional returns are typically made in four equal installments on April 15th, July 15th, October 15th, and December 31st. Failure to file tax returns may result in arbitrary assessments and penalties, with interest charged on late tax payments.
Mandatory registration
All businesses are obligated to register with both the Chamber of Commerce’s Trade Register and the Tax Office.
Dividend tax
Resident corporations distributing dividends are subject to a withholding tax rate of 25%. However, resident corporations receiving dividends from both resident and non-resident entities, provided they qualify, are exempt from this withholding tax. Profit remitted from a branch to its foreign head office is not subject to withholding tax. Additionally, there are no withholding taxes on payments made abroad, including management and technical assistance fees, royalties, and interest payments.
Income Tax- Individuals
For individuals, personal income tax applies to their entire net annual income, whether earned in Suriname or abroad, if they are resident taxpayers. Each year, tax is calculated based on the total net income from various sources during the preceding year. Determining residence depends on individual circumstances, primarily focusing on where the individual’s vital economic interests are centered. However, non-resident individuals are only taxed on income sourced from Suriname. The primary income sources for both resident and non-resident individuals include business or professional activities, employment, immovable property, and movable capital.
For resident individual taxpayers, a tax-free threshold of SRD 2,646 is considered when calculating taxable income. Both resident and non-resident individual taxpayers can benefit from a wage tax reduction of up to SRD 50 per month. Additionally, there is a fixed deduction for general work expenses applicable to employment income, amounting to 4% of gross wage or a maximum of SRD 1,200 per year, for both resident and non-resident individuals. Special rates are applied to overtime and lump-sum payments.
Taxable presence of non-resident employees
Non-resident employees, including expatriates, are subject to income tax on the wages earned during their employment in Suriname. Unlike some jurisdictions, there is no general exemption for the first 183 days of their work stay in Suriname. If a resident employer hires non-resident employees, they are responsible for withholding wage tax from regular payments and remitting it to the tax authorities. This obligation also applies if a foreign employer operates a permanent establishment in Suriname. Non-resident employees must fulfill their personal income tax duties in Suriname by filing a personal income tax return.
Wage Tax
Employers in Suriname, including permanent establishments of foreign employers, must deduct wage tax from employee wages and submit it to the tax administration on a regular basis. Alongside filing a wage tax return, employers must periodically pay the withheld wage tax to the tax authority. Wage tax serves as an advance payment of personal income tax and is imposed on the employment income of both resident and non-resident employees. Employment income encompasses all forms of compensation provided by the employer, whether in cash or in kind, with benefits in kind valued at market rates. Wage tax rates follow a progressive structure akin to personal income tax rates. Resident employees benefit from a tax-free threshold of SRD 2,646 when computing taxable income, along with a fixed deduction for general work expenses set at 4% of gross wage, capped at SRD 1,200 per year. Both resident and non-resident employees can avail themselves of a wage tax reduction of up to SRD 50 per month. Special rates are applied to overtime and lump-sum payments.
Social Security:
Employers are required to obtain limited indemnity insurance for workplace accidents for both resident and expatriate employees.
Employers must withhold a 4% premium on employment income of resident employees for public pension contributions, but this requirement does not extend to expatriate employees.
Recently, mandatory national basic health care and general pension plans have been introduced, alongside minimum hourly wages.
Wealth Tax:
Both resident and non-resident individuals are subject to wealth tax.
Resident individuals are taxed on their worldwide net assets, with certain specific items exempted.
Non-resident individuals are primarily taxed on immovable property in Suriname.
There is a tax exemption of SRD 100,000 for unmarried taxpayers and SRD 200,000 for married taxpayers.
Net wealth tax is imposed at a flat rate of 0.003%.
Rental Value Tax:
A tax is imposed on the imputed rental value of buildings.
The rate is 6% of the imputed rental value, with a minimum amount due of SRD 20.
There is a tax exemption of SRD 50,000.
The tax is payable by the owner or tenant of the building.
Other direct taxes:
– Casino tax
– Lottery tax
Sales Tax
A sales tax is levied on the following in Suriname:
– Goods delivered by entrepreneurs, produced within their business framework, at a rate of 10%.
– However, exports are exempt from this tax.
– Services provided by entrepreneurs within their business framework, taxed at a rate of 8%. Only
25 specific services are subject to this tax.
– Imported goods, with a general rate of 10%. Luxury goods may face a 25% rate, while certain
essential items are taxed at 0%.
– A deduction or refund option is available solely to manufacturers.
– They can offset sales tax
charged to and received from clients against the tax they pay on machinery, raw materials,
consumables, and related services directly involved in production.
Import Duties
Import duties are imposed on imported goods, with rates ranging from 17% to 62%, including customs duty, statistical fees (ranging from 0.5% to 1.5%), and turnover tax (ranging from 10% to 25%) for specific luxury items. There are over 1,100 goods listed with their respective rates.
Stamp Duty
Stamp duty is applied at a rate of 7% on the value of real estate transfers.
Excise Taxes
Excise taxes are applicable on various items including tobacco, cigarettes, spirits, alcoholic beverages, beer, non-alcoholic beverages, and motor fuels.
Special tax regimes apply to insurance companies in Suriname:
Suriname-based insurance companies can create a reserve to mitigate risks.
Non-Suriname-based insurance companies calculate their taxable income as 15% of their total income derived from life insurance and other insurance activities. Total income includes premiums from insured individuals or entities in Suriname for risks in Suriname, income from investments in movable and immovable property, and other sources of income.
Other indirect taxes
Other indirect taxes include taxes on public entertainment, statistical fees, consent duties, and export taxes on timber.
Tax Incentives
Under the incentive’s regime, investors can benefit from various tax-based incentives:
– Import duty exemption of up to 75% for business assets valued at a minimum of US$10,000.
– Full exemption for the production sector on raw materials, auxiliary materials, semi-finished
goods, and packaging materials.
– A nine-year tax holiday, extendable for an additional year for significant investments exceeding
US$13 million.
– Accelerated depreciation on assets.
Tax consolidation.
Non- Tax Incentives
Repayment of equity capital from abroad used for investments.
Payment of profits and/or dividends.
Payment of interest and amortization for foreign loans used for investments.
Payment of remuneration for management, technical assistance, patents, etc.
Tax Treaties
One example of a tax treaty involving Suriname is the treaty with the Netherlands, which was signed in 2011. This treaty aims to promote economic cooperation between the two countries and provides guidelines for the taxation of income, profits, and capital gains.
Additionally, the income and capital tax agreement between Suriname and the United Arab Emirates was signed on November 4, 2018, marking the inaugural treaty between the two nations. It encompasses Suriname’s income tax, wage tax, dividend tax, and wealth tax, as well as UAE’s income tax and corporate tax.