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Income Tax Amendment Act 2023

COOK ISLANDS

Income Tax Amendment Act 2023

2023, No. 3

Contents

1 Title
2 Commencement
3 Principal Act amended

Amendments related to supplemental deduction for Pa Enua

4 Section 2 amended (Interpretation)
5 Section 44 replaced (Standard supplemental deduction for individuals)
6 New Schedule 1AA inserted
7 Schedule 1 amended
8 Schedule 2 amended
9 Schedule 2A heading replaced
10 New Schedule 2B inserted

Amendment related to provisional tax assessment

11 Section 175 amended (Amount of provisional tax)

Schedule 1
New Schedule 1AA inserted
Schedule 2
New Schedule 2B inserted

An Act to—

(a) provide targeted economic stimulus and financial support to people living in the Pa Enua by increasing the standard supplemental deduction for those individuals; and
(b) correct an error in the principal Act relating to the assessment of provisional tax payable in a current tax year.

The Parliament of the Cook Islands enacts as follows—

1. Title

This Act is the Income Tax Amendment Act 2023.

2. Commencement

(1) This Act comes into force on a date appointed by the King’s Representative by Order in Executive Council.
(2) One or more orders may be made appointing different dates for the commencement of different provisions.
(3) Section 11 comes into force on 28 February 2018.

3. Principal Act amended

This Act amends the Income Tax Act 1997.

Amendments related to supplemental deduction for Pa Enua

4. Section 2 amended (Interpretation)

In section 2, insert in its appropriate alphabetical order:

“Pa Enua means the islands in the list in Schedule 1AA”

5. Section 44 replaced (Standard supplemental deduction for individuals)

Replace section 44 with:

“44 Standard supplemental deduction for individuals residing in Raratonga

“(1) In calculating the assessable income for any income year of any person who is a natural person (who is not merely acting as a trustee), a deduction must be allowed, in addition to any other deduction allowed under this Act, as follows:

“(a) for a person who is resident in Rarotonga, a deduction of—

“(i) the person’s taxable income for that year; or

“(ii) $14,600 of the person’s taxable income if the person’s taxable income for that year is more than $14,600:

“(b) for a person who is not a resident in Rarotonga and to whom section 44A(1)(a) does not apply, a deduction of the amount calculated as follows:

“a x _b_

365

“where—

“a is the person’s taxable income for that year, or $14,600 of the person’s taxable income if the person’s taxable income for that year is more than $14,600

“b is the number of days the person is present in Rarotonga during that year

“(c) for a person who permanently leaves or permanently arrives in Rarotonga, a deduction of the amount calculated in accordance with the formula set out in paragraph (b).

“(2) In this section, taxable income, in relation to a person, does not include a dividend received by the person from any company where the company has elected to deduct the dividend under section 59(k).

“(3) In this section, clause 3 of Schedule 1, and clause 2 of Schedule 2, resident in, in relation to being resident in Rarotonga, means a person made their home and was present in Rarotonga for a period of at least 183 days (cumulative not concurrent) in the relevant tax year.

“(4) For the purpose of subsection (3), a person is to be treated as present in Rarotonga if they are away from their home because they are—

“(a) undertaking education whether in the Cook Islands or overseas:

“(b) overseas in the service in any capacity of the Government of the Cook Islands or as the spouse of such a person (if the spouse is absent with that person):

“(c) overseas for the sake of their health or the health of their spouse or child:

“(d) visiting the Pa Enua for the purpose of business or employment:

“(e) travelling away from or back to Rarotonga for any of the purposes in paragraphs (a) to (d).”

“44A Standard supplemental deduction for individuals residing in Pa Enua

“(1) In calculating the assessable income for any income year of any person who is a natural person (who is not merely acting as a trustee), a deduction must be allowed, in addition to any other deduction allowed under this Act, as follows:

“(a) for a person who is resident in the Pa Enua, a deduction of—

“(i) the person’s taxable income for that year; or

“(ii) $60,000 of the person’s taxable income if the person’s taxable income for that year is more than $60,000:

“(b) for a person who is not a resident in the Pa Enua and to whom section 44 does not apply, a deduction of the amount calculated as follows:

“a x _b_

365

“where—

“a is the person’s taxable income for that year, or $60,000 of the person’s taxable income if the person’s taxable income for that year is more than $60,000

“b is the number of days the person is present in the Pa Enua during that year

“(c) for a person who permanently leaves or permanently arrives in the Pa Enua, a deduction of the amount calculated in accordance with the formula set out in paragraph (b).

“(2) In this section, taxable income, in relation to a person, does not include a dividend received by the person from any company where the company has elected to deduct the dividend under section 59(k).

“(3) In this section, clause 3A of Schedule 1, and clause 2A of Schedule 2, resident in, in relation to being resident in the Pa Enua, means a person made their home and was present on 1 or more islands in the Pa Enua for a period of at least 183 days (cumulative not concurrent) in the relevant tax year.

“(4) For the purpose of subsection (3), a person is to be treated as present in the Pa Enua if they are away from their home because they are—

“(a) undertaking education whether in the Cook Islands or overseas:

“(b) overseas in the service in any capacity of the Government of the Cook Islands or as the spouse of such a person (if the spouse is absent with that person):

“(c) overseas for the sake of their health or the health of their spouse or child:

“(d) visiting Rarotonga for the purpose of business or employment:

“(e) travelling away from or back to the Pa Enua for any of the purposes in paragraphs (a) to (d).”

6. New Schedule 1AA inserted

Before Schedule 1, insert as Schedule 1AA the schedule set out in Schedule 1 of this Act.

7. Schedule 1 amended

In Schedule 1, replace clause 3 with:

“3. Natural persons resident in Rarotonga

“For the purposes of section 40, the basic rate for each taxpayer who is an individual natural person (who is not merely acting as a trustee) and resident in Rarotonga is the amount set out in the following table:

“3A. Natural persons resident in Pa Enua

“For the purposes of section 40, the basic rate for each taxpayer who is an individual natural person (who is not merely acting as a trustee) and resident in the Pa Enua is the amount set out in the following table:

8. Schedule 2 amended

(1) In Schedule 2, replace clause 2 with:

“2. Payments for pay periods of weekly duration for persons resident in Rarotonga

“(1) From each payment of salary or wages where the payment is for a weekly pay period, the basic tax deduction is the following:

“(a) for primary income, the amount set out in Schedule 2A that corresponds to the weekly income amount:

“(b) for secondary income, the following:

“(i) 17% of the amount set out in Schedule 2A that corresponds to the weekly income amount, if the employee’s total income is $30,000 or less for the income year; or

• “(ii) 27% of the amount set out in Schedule 2A that corresponds to the weekly income amount, if the employee’s total income is more than $30,000 but of or less than $80,000; or

“(iii) 30%, if the employee’s total income is more than $80,000.

“(2) Subclause (1)(b) applies unless the Collector otherwise determines under section 153.”

“2A. Payments for pay periods of weekly duration for persons resident in Pa Enua

“(1) From each payment of salary or wages where the payment is for a weekly pay period, the basic tax deduction is the following:

“(a) for primary income, is the amount set out in Schedule 2B that corresponds to the weekly income amount:

“(b) for secondary income, is the following:

“(i) 27% of the amount set out in Schedule 2B that corresponds to the weekly income amount, if the employee’s total income is more than $60,000 but of or less than $80,000; or

“(ii) 30%, if the employee’s total income is more than $80,000.

“(2) Subclause (1)(b) applies unless the Collector otherwise determines under section 153.”

(2) In Schedule 2, clause 3, replace “Schedule 2A” with “Schedule 2A or 2B (as relevant)”.
(3) In Schedule 2, replace clause 4 with:

“4 Payments for other cases

“(1) From each payment of salary or wages where neither A nor B applies, the basic tax deduction is, in respect of so much of the payment as is for the services of the employee during any week ending with a Saturday (calculated in accordance with section 150, if applicable), the amount that would be made under C and D if the payment or the part payment, as the case may be, were for a weekly pay period ending with that Saturday.

“(2) In this clause—

A nor B means—

“(a) for Rarotonga, clause 2 or 3:

“(b) for Pa Enua, clause 2A or 3

C and D means—

“(a) for Rarotonga, clause 1 and Schedule 2A:

“(b) for Pa Enua, clause 1 and Schedule 2B.”

9. Schedule 2A heading replaced

Replace the Schedule 2A heading with:

“SCHEDULE 2A

“PAYE SCHEDULE FOR RESIDENTS OF RAROTONGA”

10. New Schedule 2B inserted

After Schedule 2A, insert as Schedule 2B the schedule set out in Schedule 2 of this Act.

Amendment related to provisional tax assessment

11. Section 175 amended (Amount of provisional tax)

Replace section 175(3) with:

“(3) Despite subsection (1), if a provisional taxpayer expects to have a tax liability in year A of an amount of $20,000 or more, the provisional tax payable for year A is the expected amount minus any tax deductions or withholding of tax made from any source deduction payments or withholding income included in the income in year B.”

Schedule 1

New Schedule 1AA inserted
ss 4, 6

SCHEDULE 1AA

LIST OF ISLANDS IN PA ENUA

Atiu

Aitutaki

Mangaia

Manihiki

Manuae

Mauke

Mitiaro

Nassau

Palmerston

Penrhyn

Pukapuka

Rakahanga

Suwarrow

Takutea

Schedule 2

New Schedule 2B inserted
s 10

SCHEDULE 2B

PAYE SCHEDULE FOR RESIDENTS OF PA ENUA

This Act is administered by the Revenue Management Division of the Ministry of Finance and Economic Management.

Printed under the authority of the Cook Islands Parliament—2023.