Elaborating on the Amendments to the Income Tax Act 1997 passed in Parliament last week, Brown says it’s the Government's desire to reduce income taxes on income earners in the Cook Islands.
Amendments to the Income Tax Act 1997 clarify that income from a Cook Islands administered trust is taxable only to the trustees and not again, once distributed, to the beneficiaries.
Income from foreign trusts will continue to be taxable to Cook Islands beneficiaries.
Brown pointed out that the Cook Islands was a low tax jurisdiction on any measure and the Government will continue to aim to keep overall taxation levels low and ensure the burden is spread evenly across society.
“The Government is keen to reduce income tax in a considered manner, a person on $26,000 per annum (or $500 a week) will receive a further reduction on their annual personal income tax burden by $150 a year on January 1, 2016 and a further $75 on January 1, 2017,” Brown said in a statement.
In his speech to Parliament, the Minister pointed out that country would move towards signing the OECD's Multilateral Competent Authority Agreement which will see the Cook Islands move towards the automatic exchange of taxation information.
Financial Secretary, Richard Neves outlined the importance of the Cook Islands signing the agreement which was recently signed by both New Zealand and Australia.
“The Ministry of Finance and Economic Management will outline to Cabinet a proposed timeline, but that the Cook Islands will be exchanging information prior to September 2018,” Neves says.
“There will need to be significant effort in modernising systems and processes which we need to start planning for now and technical assistance and increased investment will be required."
Cook Islands has 20 Tax Information Exchange Agreements (TIEA)’s signed with a number of nations, including a couple from the European Union and these are listed on the MFEM website.
Current Rate from January 1, 2016: less than 11,000 0% 0%, 11,001-30,000 18.5% 17.5%, 30,001-80,000 27.5% 27.5%, 80,001 and over 30.0% 30.0%.
Meanwhile, it is a requirement for anyone with a bank account to provide the bank with an RMD number.
From January 1, 2016 a withholding tax of 30 per cent will be applied on interest paid to account holders who have not provided an RMD number to their bank.
This is not a final tax, the taxpayer will be able to offset the tax paid against their annual income tax assessment.
Additionally, banks will now be required to provide to their customers no later than 15 February of each year, an interest earnings certificate for the previous income year (i.e. January 1 to December 31) showing all amounts of interest paid to the individual customer.