- Business Records
- Company Tax
- Compliance Plan
- Employers (PAYE)
- Individual Tax
- International Tax Agreements
- Mining Tax
- Provisional Tax
- Tax Info Exchange Agreements
- Taxpayer Charter
- Transfer Pricing Regulations
Keeping Of Business Records
The Income Tax Act requires that every person carrying on a business or deriving income other than salary and wages shall keep sufficient records to enable that person’s assessable income and allowable deductions to be readily ascertained by the Tax Department.
Such records must be kept for a minimum period of 5 years after the completion of transactions.
Company tax returns for companies with a December balance date are due on 1 May the following year.
- The resident company income tax is a flat rate of 20%.
- The non-resident company income tax is a flat rate of 28%.
Compliance Plan 2014/15
The importance of our role in collecting revenue for government necessitates that we focus our compliance efforts in a more structured way. The assessment, audit, and collections processes have been examined, which has led us towards taking a more proactive approach, and to work together using effective strategies towards compliance.
The Tax team has identified components required to achieve greater compliance by our taxpayers, and this plan sets out these components and areas of focus. Resources will be allocated to the greatest areas of risk, including developing our people and our skills.
This plan is intended to evolve over time. We will be reviewing and updating it semi-annually.
We will continue to work towards having strategies and structures in place to create an environment that encourages voluntary compliance, whilst at the same time detecting and penalising non-compliance.
It is compulsory for all employers to deduct PAYE from wages, salary and other payments made to employees.
The Revenue Management office has both resident and non resident PAYE tables available which set out the PAYE amounts to be deducted. PAYE returns are combined with the VAT return booklets.
Monthly VAT/PAYE returns have appropriate boxes to record the monthly wages and PAYE. The due date for payment and filing is the 20th day of the month following the payment of wages. If the 20th of the month falls on a weekend or public holiday, your return will be due on the next working day following the weekend or public holiday.
After year end tax deduction certificates (RM101) listing all wages and PAYE deducted for each employee should be completed.
A PAYE, Reconciliation Statement together with the top copy of the Tax Deduction Certificates showing details of employee’s earnings and tax deducted for the year, must be completed by the employer and sent to Revenue Management by 15 February each year.
The duplicate copy of the Tax Deduction Certificates is to be given to each employee (or former employee) so they can complete their personal tax returns.
Income Tax is paid on all income earned in the Cook Islands and all worldwide income received by Cook Island tax residents.
Taxpayers are required to file annual income tax returns. Individual income tax returns are due on 1 March the following year.
The income year in the Cook Islands is 1 January - 31 December. The due date for payment of terminal tax is 1 October the following year.
Businesses not legally incorporated, such as most shops, must declare their revenue as personal income, either as a sole proprietor or in a partnership, whatever the case may be.
Individual income tax rates are as follows:
- 0 - $11,000 exempt
- $11,001 - $30,000 17.5%
- $30,001 - $80,000 27.5%
- $80,001 & above 30%
Note: the $11,000 exemption is for a full year of residence in the Cook Islands. The exemption is apportioned to days resident for individuals who have not been resident for a full year.
Non residents only receive the exemption for the days they are personally present in the Cook Islands.
On 8 October 2014 the Cook Islands Parliament passed an amendment to the Income Tax Act 1997 which retrospectively exempts New Zealand Superannuation as assessable for income tax purposes up until 31 December 2012.
People in the Cook Islands who have been in receipt of the New Zealand Superannuation are now able to have their tax returns reassessed. In situations where monies are owed to those individuals by the Crown, it can either be refunded or credited to meet future or outstanding tax obligations.
The Revenue Management Division have written to its current list of people in the Cook Islands who are receipt of New Zealand Superannuationto be engaged in this process.
People in receipt of New Zealand Superannuation are still required to include their superannuation income received in 2013 in their 2013 tax return. If a person is unable to pay their tax by the due date of 3 November 2014 then they should contact the Revenue Management Division at MFEM and enter into an arrangement.
International Tax Agreements
On Friday 13 December 2013, the Cook Islands Parliament passed the Income Tax Amendment Act 2013. Together with the Seabed Minerals (Royalties Regulations 2013, the Cook Islands Government formalised the tax framework for the mining industry (including seabed mineral mining).
In addition to normal company taxes, mining operations are required to pay a 3 per cent royalty on the value of minerals they extract. They are also required to pay a resource rent tax (or additional profits tax) on any profits they derive beyond a certain level.
The resource rent tax has been set at a tax rate of 25 per cent after positive cash flows exceed costs by 20 per cent.
This regime ensures the Government receives revenue from the royalty as soon as production commences, company tax on profits made, while also providing the government a share of the economic rents (or profits derived from resource extraction) of more profitable projects.
Other taxes that will relate to the mining sector are non-resident withholding taxes, VAT, and company tax.
To ensure that the company tax system is able to cope with the mining activities and associated significant international transactions, a number of other reforms were also put into the legislation. These changes will apply to all companies in the Cook Islands, but in practice, will largely affect only mining company operations.
The changes include: introducing thin capitalisation rules (to prevent financing through excessive debt); strengthening the transfer pricing rules (rules governing charges between related entities) by introducing an arm’s length rule and specifying acceptable methods for determining arm’s length prices; ensuring income from mining activities is treated as Cook Islands source income; and ring-fencing mining expenditure to specific projects, except for unsuccessful mining exploration expenses.
A number of provisions under the current law that are likely to be important to mining companies have been retained, including: the current company tax rates (20 percent for resident companies and 28 percent for non-resident companies); capital allowances (depreciation rates) based on the useful life of the asset; and unlimited loss transfer (except for substantial changes of ownership).
Depending on a company's balance date, this is generally payable in 2 equal instalments on 1 June and 1 December in the year the company's income is earned. The provisional tax payable is based upon the company's previous year’s terminal tax. Companies can estimate their assessable income to base their provisional tax on, however, if the company estimates lower than the previous year’s assessable income, and lower than 80% of its actual assessable income, it will become liable for additional tax of 10% on the amount of underestimated provisional tax.
Provisional tax is not payable if the company's terminal tax does not exceed $2,000 in the previous year, unless the company's current year’s terminal tax is $20,000 or more.
ABC Ltd has a 31 December balance date and has terminal tax to pay of $17,800 to pay for its 2013 year. Unless ABC Ltd estimates its provisional tax payable for 2014, $8,900 will be payable as a 1st instalment of provisional tax on 1 June 2014 and a further $8,900 2nd instalment will be due on 1 December 2014.
XYZ Ltd has a 31 December balance date and has terminal tax to pay of $1,800 to pay for its 2013 year. XYZ Ltd's income increased significantly in 2014 and its terminal tax was $25,000. Unless ABC Ltd estimated its provisional tax payable for 2014, $12,500 would have been payable as a 1st instalment of provisional tax on 1 June 2014 and a further $12,500 2nd instalment was due on 1 December 2014. In this case, whilst the company's 2013 terminal tax was less than $2,000, its 2014 terminal tax was above $20,000, therefore it was subject to provisional tax in that year.
Revenue Management Policies and Rulings
List of Tax Information Exchange Agreements (TIEAs) signed by the Cook Islands as at September 2015:
|Jurisdiction||Type of Eol Arrangement||Date Signed||Date Entered Into Force|
|3||Canada||TIEA||15-Jun-15||not yet in force|
|4||Czech Republic||TIEA||24-Feb-15||not yet in force|
|6||Faroe Islands||TIEA||16-Dec-09||not yet in force|
|10||Greece||TIEA||12-Feb-13||not yet in force|
The Cook Islands is a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes. Please click here to review our Global Forum webpage.
Phase 1 Peer Review Report - Executive Summary
PO Box 120
+ 682 22878
What are your rights and obligations as a taxpayer?
Revenue Management collects money to pay for public services.
We work within the Revenue Acts and other relevant laws to help people meet their obligations.
How we will work with you
We will be prompt, courteous and professional.
The person you are dealing with will give you their name.
We will follow through on what we say we will do.
We will strive to continually improve our service.
We acknowledge your individual needs and will tailor assistance accordingly.
Reliable advice and information
We will provide you with reliable and correct advice and information about your tax obligations.
We will assist you to get in touch with the right people for your needs.
We will be well-trained and competent.
We will keep looking for new and improved ways to give you advice and information.
Confidentiality and privacy
We respect your privacy and treat all information about you as private and confidential.
Information you provide will be kept secure and will be used or disclosed only as required by law.
Consistency and equity
We will apply the law fairly and consistently so everyone pays the right amount.
We will be firm with those who try to avoid their obligations and effective in bringing them to account.
We will take your particular circumstances into account as far as the law allows us to.
Your rights and obligations
You can question the information, advice and service we give you. We will inform you about options available for resolving disagreements, and we will work with you to try and reach an outcome quickly and simply.
If you are in business it is your obligation to comply with audits from time to time.
If you owe tax we expect prompt and full payment. If you cannot fully pay your tax on time we expect you to contact us so that a mutually acceptable arrangement for payment can be reached.
For this Charter to work effectively, we rely on each taxpayer to provide all the relevant information when dealing with Revenue Management.
Treasurer of Revenue Management
Transfer Pricing Regulations
If you have any questions please contact us on 29365.