WAGES AND INCOME TAX INTRODUCED

SRSG today signed an amendment to Regulation 2000/18 on a Taxation System for East Timor, introducing a wages and income tax.

This Regulation had previously been approved by the East Timor Cabinet and by the National Council.

The revenue collected from these taxes goes to the East Timor Budget.

The Regulation will, from 1 January 2001, introduce a tax on wages; introduce new tax arrangements for business income tax; and amend the taxes applying to imports.

Wages tax will not apply to East Timorese who earn less than US$100 per month. Employees earning more than US$100 per month will pay 10 per cent of their income above US$100 per month. A person earning, for example, US$150 dollars per month will pay US$5 dollars in wages tax. Similarly, a person earning US$300 dollars month will pay US$20 dollars in wages tax each month.

Those earning more than US$650 per month will pay 30 per cent of their wages over US$650 per month. For example, a person earning US$1000 per month will pay US$160 of tax each month.

Employers are responsible for deducting the wages tax from the pay packets of employees and pay it to the East Timor Revenue Service (ETRS). Employees will not have to deal with the Revenue Service and will not have to complete annual tax returns.

Consistent with international conventions, employees of foreign governments and international staff of the United Nations are exempt from paying wages tax.

Officers of the East Timor Revenue Service are distributing information kits to businesses about the new business income tax arrangements. Businesses must register with the ETRS for the purposes of wages and income taxes.