Finance Ministry Clarifies Income Tax Measures
Government’s Intention to Make Adjustments
Since presenting the GUY$1.38 trillion national budget to Parliament last Friday, Senior Minister in the Office of the President with Responsibility for Finance and the Public Service, Dr. Ashni K. Singh, has received "several requests" seeking further explanation regarding the personal income tax measures.
Background on Current Tax System
Before the Irfaan Ali government came to office in 2020, there were two rates of income tax, namely, 28 and 40 percent, with the threshold being set at GUY$60,000 monthly, or one-third of the salary, whichever is greater. This meant that the first GUY$60,000 or greater of the monthly salary would be taxed at zero percent, the next GUY$120,000 of the monthly salary, twice the amount of the threshold, would be taxed at 28 percent, and the remainder of the monthly salary above that would be taxed at 40 percent.
Proposed Changes
However, in his statement, Dr. Singh said the government’s intention is to make adjustments in 2025 to the threshold and rates of personal income tax payable. The plan is to increase the threshold to GUY$130,000 monthly and lower the tax rates of 28 percent and 40 percent to 25 percent and 35 percent, respectively.
Impact of Proposed Changes
As a result of these proposed changes, the first GUY$130,000 of the monthly salary, or one-third of the wages if that is greater, will now be taxed at zero percent, would now be taxed at 25 percent, with the remainder above that would now be taxed at 35 percent. Additionally, the allowance of GUY$10,000 per child monthly, and the allowances of up to GUY$50,000 monthly for overtime and up to GUY$50,000 monthly for income earned from a second job, will also be taxed at zero percent.
Implementation
The tabled Estimates of Revenue and Expenditure for 2025 already incorporate the above adjustments, even though this full elaboration was not provided in the budget speech. These changes will be reflected in proposed amendments to the Income Tax Act to give legal effect from year of income 2025.
Frequently Asked Questions
Q: What are the current rates of income tax?
A: The current rates are 28 and 40 percent.
Q: What is the current threshold for income tax?
A: The current threshold is GUY$60,000 monthly, or one-third of the salary, whichever is greater.
Q: What are the proposed changes to the income tax system?
A: The government plans to increase the threshold to GUY$130,000 monthly and lower the tax rates of 28 percent and 40 percent to 25 percent and 35 percent, respectively.
Q: When will the proposed changes take effect?
A: The changes will be reflected in the proposed amendments to the Income Tax Act and will give legal effect from year of income 2025.