AMENDMENTS TO THE INCOME TAX ACT

On 19 June 2015 the Parliament of the Cook Islands passed amendments to the Income Tax Act 1997.

PERSONAL INCOME TAXATION RATES

From 1 January 2016 the Cook Islands will reduce personal income tax.

                                          Current Rate         From 1 January 2016

             -        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%

Minister for Finance, the Honourable Mark Brown pointed out the Government’s desire to reduce income taxes on income earners in the Cook Islands.  

“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 dollars a year on 1 January 2016 and a further 75 dollars on 1 January 2017. 

By 1 January 2017 that individual would have received a total reduction of $1,450 per annum since the commencement of our tax reforms began.”

Minister Brown pointed 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 aim to ensure the burden is spread evenly across society. 

AUTOMATIC EXCHANGE OF INFORMATION 

In his speech to Parliament the Minister pointed out that the Cook Islands 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 Multilateral Competent Authority 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.  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.” 

Currently, the Cook Islands has twenty Tax Information Exchange Agreements (‘TIEA’)s signed with a number of nations, including a number from the European Union and these are listed on the MFEM website.

RMD NUMBERS AND BANK ACCOUNTS 

It is a requirement for anyone with a bank account to provide the bank with an RMD number. From 1 January 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. 1 January to 31 December) showing all amounts of interest paid to the individual customer.

COOK ISLANDS ADMINISTERED TRUST 

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.

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