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Income Tax Act

Act 5 of 1992



INCOME TAX ACT 1992

Income Tax Act 1992 Arrangement of Sections

Act 5 of 1992
 Page 3



INCOME TAX ACT 1992
Arrangement of Sections
Section
PART 1 – PRELIMINARY 9
1 Citation and commencement…………………………………………………………………. 9
2 Definitions …………………………………………………………………………………………. 9
3 Interpretation of the Act. …………………………………………………………………….. 29
4 Binding interpretations in relation to circumstances in which certain
provisions may apply …………………………………………………………………………. 30

PART 2 – LIABILITY TO INCOME TAX 31
5 Personal liability to income tax……………………………………………………………. 31
6 Accounting periods not coinciding with calendar year……………………………. 31
PART 3 – DETERMINATION OF TAXABLE INCOME 33
7 Requirement to include gross income in taxable income…………………………. 33
8 When gross income is to be regarded as having a source within Tuvalu. ….. 33
9 Items specifically included within the term ‘gross income’. …………………….. 34
10 Special provisions relating to pre-incorporation contracts ………………………. 35
11 Authority to claim deductible costs as a deduction from gross income……… 36
12 Authority to treat expenditure as deductible costs. …………………………………. 36
13 Certain losses and allowances deemed to be expenditure………………………… 36
14 Circumstances in which no deduction shall be allowed for expenditure ……. 37
15 Expenditure which is deemed to be a deductible cost. ……………………………. 39
16 Special provisions relating to the determination gains and losses. ……………. 40
17 Need for allocation and apportionment…………………………………………………. 40
18 Treatment of trading stock of any business. ………………………………………….. 41
19 Special provisions relating to the treatment of gross income and related
expenditure……………………………………………………………………………………….. 42

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20 Special provisions for determining the taxable income content of
throughput. ………………………………………………………………………………………..44

21 Minister empowered to prescribe a simplified method of determining
taxable income in the interest of reducing compliance costs. ……………………45

22 Adjustments required where persons or assets move in or out of the tax
base…………………………………………………………………………………………………..47

23 Determining the year in which gross income and expenditure is to be
recognised. ………………………………………………………………………………………..48

24 Anti-tax avoidance provisions………………………………………………………………50
25 Tax losses. …………………………………………………………………………………………54
26 A company may elect to have its taxable income taxed directly in the
hands of (and tax losses allocated directly to) its shareholders. …………………55

PART 4 – CREDITS FOR OVERSEAS TAX 59
27 Credits for overseas tax ……………………………………………………………………….59
PART 5 – STATUS OF PERSONS IN RELATION TO
PARTICULAR TRANSACTIONS OR CIRCUMSTANCES 60
28 Status of persons representing a company ……………………………………………..60
29 Effect of liquidation or receivership on the tax status of a company ………….61
30 Status of partners in a partnership or parties to a joint venture ………………….62
31 Persons making certain payments to non residents deemed to be an
agent of the non resident ……………………………………………………………………..62

32 Liability of persons representing non-residents ………………………………………63
33 Status of persons representing an incapacitated person ……………………………63
34 Status of executor and administrator, or trustee, in relation to the estate
of a deceased person……………………………………………………………………………63

35 Minister’s power to appoint agent …………………………………………………………63
36 Right of persons to recover income tax from persons they represent …………64
PART 6 – OBLIGATION TO WITHHOLD TAX FROM PAYMENTS
MADE TO OTHER PERSONS, AND LIABILITY TO TAX ON NON
RESIDENT WITHHOLDING INCOME 64
37 Obligation on persons to withhold or collect income tax at source ……………64
38 Income tax treatment of non resident withholding income ……………………….68
PART 7 – ADMINISTRATION OF THE ACT AND COLLECTION
OF INCOME TAX 70
DIVISION 1 – RECORD KEEPING ………………………………………………………….70
39 Requirements to keep appropriate records ……………………………………………..70
40 Requirement of a person to provide officials with information and
assistance on request …………………………………………………………………………..72

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DIVISION 2 – RETURNS ……………………………………………………………………….73
41 Requirement to furnish a return of income ……………………………………………. 73
42 Persons required to lodge returns of information……………………………………. 75
43 Extension of time for furnishing any return of income……………………………. 77
44 Extension of time for doing or furnishing any other thing ………………………. 77
DIVISION 3 – NOTICES OF ASSESSMENT …………………………………………….78
45 Notice of determination of loss ……………………………………………………………. 78
46 Obligation on Taxation Officer to issue a notice of assessment, and
matters to be dealt with in any such notice ……………………………………………. 78

47 Exceptions to the requirements as to the issue of a notice of assessment …… 80
48 Other circumstances requiring the issue of a notice of assessment …………… 80
49 Notice of amended assessment ……………………………………………………………. 81
50 Limitation of time for the issue of a notice of assessment ……………………….. 82
51 Right of persons to require the issue of a notice of amended assessment…… 83
52 Processing of income tax refunds ………………………………………………………… 83
DIVISION 4 – PAYMENT OF INCOME TAX NOT ACCOUNTED FOR BY
WITHHOLDING AT SOURCE, AND THE RELATED INTEREST AND
LATE PAYMENT PENALTY PROVISIONS ……………………………………………..84

53 Obligation to make a provisional tax payment by 30 September on
account of final liability to income tax …………………………………………………. 84

54 Obligation to make a provisional tax payment by the last day of
February on account of final liability to income tax ……………………………….. 85

55 Special provisions relating to the determination of provisional tax
obligations………………………………………………………………………………………… 86

56 Obligation to settle residual income tax liabilities ………………………………….. 86
57 Obligation to pay residual income tax not affected by certain events ……….. 87
58 Interests payable to the Crown on any amounts of income tax not paid
by the prescribed date ………………………………………………………………………… 88

59 Late payment penalty payable to the Crown where any unpaid residual
income tax remains outstanding for an extended period………………………….. 89

60 Late payment penalty payable to the Crown where any income tax
required to be withheld or collected at source remains outstanding for
an extended period …………………………………………………………………………….. 89

61 Special provisions applying to persons in default of their obligations
with respect to income tax requires to be withheld or collected at
source ………………………………………………………………………………………………. 90

62 Circumstances where the provisions relating to the charging of interest
and late payment penalty will not apply ……………………………………………….. 90

63 Minister may provide relief from late payment penalties in respect of
income tax liabilities subject to objection and appeal procedures …………….. 91

64 Right of persons to secure an early refund of income tax overpaid …………… 92
65 Interest credit due to any person entitled to a refund of income tax ………….. 93

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DIVISION 5 – OFFENCES AGAINST THE ACT ………………………………………..93
66 Situations involving fraud and complicity ……………………………………………..93
67 Classification of offences and determination of whether an offence has
been committed ………………………………………………………………………………….94

68 Penalties for Category 1 offences………………………………………………………….95
69 Penalties for Category 2 offences………………………………………………………….95
70 Penalties for category 3 offences…………………………………………………………..96
71 Application of penalties in cases where a Category 1 or Category 2
offence is admitted ……………………………………………………………………………..96

DIVISION 6 – OBJECTION AND APPEAL RIGHTS AND PROCEDURES ……97
72 Objection and appeal procedures ………………………………………………………….97
DIVISION 7 – ADMINISTRATION ……………………………………………………………99
73 Income tax to be payable notwithstanding prosecutions …………………………..99
74 Order for the payment of income tax …………………………………………………….99
75 Recovery of income tax……………………………………………………………………….99
76 Certificate of income tax due ……………………………………………………………..100
77 Responsibility of the Secretary …………………………………………………………..100
78 Responsibility of the Taxation Officer …………………………………………………101
79 Requirement as to secrecy ………………………………………………………………….101
80 Procedure where Minister is a party to an alleged offence or has a
conflict of interest……………………………………………………………………………..102

81 Form of returns etc ……………………………………………………………………………102
PART 8 – ABILITY OF THE GOVERNMENT TO MODIFY THE
PROVISIONS OF THE ACT 102
82 General power for the Minister to issue regulations and amend
Schedules to the Act ………………………………………………………………………….102

83 Specific powers to alter the Act in the commercial or economic
interests of Tuvalu …………………………………………………………………………….103

84 Power of the Minister to conclude treaties with other countries ………………104
85 Power of the Minister to issue a certificate of exemption or regulations
authorising non compliance with the requirements of the Act …………………105

PART 9 – GENERAL PROVISIONS 105
86 Repeals and savings ………………………………………………………………………….105
87 Transitional provision on this Act coming into force……………………………..106

SCHEDULE 1 107
EXEMPT INCOME ……………………………………………………………………………..107

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SCHEDULE 2 114
ALLOWABLE DEPRECIATION …………………………………………………………….114
SCHEDULE 3 116
INVESTMENT ALLOWANCES …………………………………………………………….116
SCHEDULE 4 117
PERSONS WHOSE GROSS INCOME FROM SPECIFIED SOURCES IS
TO BE DETERMINED AS A SPECIFIED PERCENTAGE OF
THROUGHPUT. …………………………………………………………………………………117

INCOME TAX TO BE WITHHELD OR COLLECTED AT SOURCE……………119
SCHEDULE 6 122
APPLICABLE INCOME TAX RATES AND REBATES FROM INCOME
TAX ………………………………………………………………………………………………….122

SCHEDULE 7 124
PRESCRIBED RATES OF INTEREST ………………………………………………….124
SCHEDULE 8 125
TRANSITIONAL PROVISIONS …………………………………………………………….125
Supporting Documents
ENDNOTES 127
Table of Legislation History …………………………………………………………………………… 127
Table of Renumbered Provisions …………………………………………………………………….. 127
Table of Endnote References ………………………………………………………………………….. 127

Income Tax Act 1992 Section 1

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INCOME TAX ACT 1992
Act 5 of 1992
AN ACT TO IMPOSE A TAX ON TAXABLE INCOME, AND TO
PROVIDE FOR THE COLLECTION AND MANAGEMENT OF
THE TAX
I assent,
Sir Toaripi Lauti PC GCMG
Governor-General
17th December, 1992
Commencement [ 1st January 1993 ] PART 1 – PRELIMINARY
1 Citation and commencement
This Act may be cited as the Income Tax Act 1992, and subject to section 87(4)
shall come into operation on such date as the Minister may by notice appoint.
2 Definitions
In this Act, unless the context otherwise requires:
“agent”, in relation to any person includes:
(a) any other person who has the authority to act in a representative
capacity in relation to that first person, so far as that authority
extends;

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(b) any attorney, factor, or receiver, or a manager appointed under
statute in relation to that person;
(c) where that person is incapacitated the legal guardian of that person;
(d) where that person is a non resident, any other person who is deemed
to be an agent of that non resident pursuant to the provisions of
section 32;
(e) any other person whom the Minister declares to be an agent of that
first person pursuant to section 35;
(f) any person who is liable to withhold or collect income tax in
relation to a source deduction payment, to the extent contemplated
by section 37; and
(g) any person who is deemed by this Act to be an agent in relation to
any payment or transaction, to the extent so provided;
“annual reporting date” means the last day of the year, or where a
substituted reporting period is approved in relation to the operation of any
business, the lat day of that substituted reporting period;
“appropriate portion of income tax” in relation to any person and any
category of income and any year means:
(a) that portion of the amount of income tax for which the person is
liable for the year (being the amount as calculated under section
5(2) prior to taking into account any credits for overseas tax under
that section); and
(b) the proportion which that person’s net income of that category (after
deduction of related deductible costs) for that year bears to that
person’s total taxable income for that year;
“appropriate portion of overseas tax” in relation to any person and any
category of income and any year means the portion of overseas tax paid
for the year which the Taxation Office is satisfied is fairly attributable to
the amount of gross income of that category for the year; and for this
purpose the Taxation Officer:
(a) may make such adjustments or allowances as he considers just and
equitable; and
(b) may adopt such administrative practices as may be appropriate,
to accommodate either:
(c) different reporting periods adopted in any overseas country; or
(d) practical difficulties that are the appropriate portion;
“approved annuity contract” means any contract which the Minister is
satisfied has as its principal object the provision for a person (or for that
person’s spouse, or for that person and his spouse) of a life or term annuity

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in old age or upon retirement on the grounds of ill health or similar, or for
a lump sum endowment in lieu of such an annuity, and determines
accordingly in writing:
Provided that where that approval is made subject to conditions, that
contract shall only be an approved annuity contract if and for so long as
those conditions are met;
“approved community service organisation” is any organisation (not
being a benevolent, religious, educational, cultural, amateur sporting or
charitable organisation) which the Minister is satisfied:
(a) is, and operates as, a non-profit enterprise serving general
community interests; and
(b) is not for the direct or indirect personal pecuniary gain of members,
and approves accordingly by public notice;
“approved fund” means any scheme which the Minister is satisfied was
established by an employer for the payment of pensions or lump sum
benefits to employees in their old age or on their retirement on the
grounds of ill health or similar, and determines accordingly in writing:
Provided that where that approval is made subject to conditions, that fund
shall only be approved fund if and for so long as those conditions are met;
“arrangement” includes any arrangement, agreement, contract,
transaction, plan or understanding, whether or not enforceable at law,
including an steps which form a part thereof or which helped put into
effect;
“benefit of debt release” includes any advantage or benefit accruing to a
person by reason of the remission or release of any part of any amount of
indebtedness, whether this occurs by reason of:
(a) any act of release or forgiveness of forbearance or compromise or
similar by the person to whom that debt is owed;
(b) the prescription of any amount of indebtedness by the effluxion of
time or by the operation of statute; or
(c) any occurrence similar to any of the above,
but shall not include any such benefit to the extend to which it:
(d) is an emolument;
(e) arises by reason of natural love and affection shown by one
individual to another; or
(f) is a benefit which the Secretary, having regard to all the
circumstances of the case, considers that in equity, or in the
economic interests of Tuvalu, should not constitute gross income;

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“business” includes any business, trade, profession, or vocation, carried
on for profit, as well as:
(a) any profit making scheme or undertaking;
(b) any adventure or activity in the nature of trade where the making of
profit is an element, or profit may reasonably be anticipated; or
(c) any activity involving the acquisition and disposition of an asset
where the principal purpose in acquiring the asset is or was its
subsequent disposition for profit:
Provided that the term “business” shall not include:
(d) any scheme, undertaking, advent, or activity of a local authority,
except where and to the extent that the Minister considers:
(i) there exist commercial motives on the part of the authority;
or
(ii) the relevant scheme, undertaking, adventure, or activity
operates or will operate in competition with any other
business;
and by regulation determines the existence of a business; or
(e) the derivation of passive investment income (otherwise than as part
of a wider business scheme, undertaking, adventure or activity);
“capital asset” means any asset which is acquired by a person where that
asset was not acquired or used by that person with the principal purpose of
disposal:
Provided that the term “capital asset” shall not include any interest of a
person as a member of a pension, provident, superannuation or benefit
fund;
“company” means any body of persons, whether or not incorporated,
which is established or otherwise formed or is registered in Tuvalu or
elsewhere, for a common purpose, and includes:
(a) statutory bodies;
(b) any cooperative society;
(c) the Crown (in relation to any enterprise of a trading nature);
(d) any benevolent, religious, educational, charitable, cultural, amateur
sporting or community service institution or organisation (in
relation to investment and business income);
(e) any local authority (in relation in relation to investment and
business income);
(f) any trade union;

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(g) any pension, provident, superannuation or benefit fund, whether or
not an approved fund; and
(h) any body of persons which the Minister by regulation determines to
be a company for the purpose of this Act
but shall not include:
(i) any family;
(j) any partnership;
(k) a joint venture;
(l) a trust or a deceased estate;
(m) any joint ownership of an asset; or
(n) any body or persons which the Minister by regulation determines
not to be a company for the purpose of this Act;
“cost price” in relation to any item means the actual purchase price (or if
the item was not acquired by purchased, its market value at acquisition)
with —
(a) any duty, sales tax, levy, or impost subsequently applicable to
getting the item into its location for use or disposal (as the case may
be);
(b) any freight or insurance or other charge subsequently applicable to
getting the item into its location for use or disposal (as the case may
be):
Provided that —
(c) where the item comprises any work in progress under construction,
the cost price of that work shall include an appropriate share of
overhead costs;
(d) where, at the request of any taxpayer, the Secretary approves an
alternative basis of arriving at cost price, the cost price determined
pursuant to that basis shall be deemed to be the cost price of the
item;
(e) where the Act provides for an alternative amount to be the cost
price of any item, that alternative amount shall apply in lieu of the
cost price otherwise determined in accordance with the preceding
parts of this definition; and
(f) where any amount or benefit receivable by way of credit, rebate,
discount, allowance, grant, contribution or otherwise towards or
against the purchase price or market value of any item or items, the
cost price of that item or items (determined in accordance with the
preceding parts of this definition) shall be reduced by the amount or
value of the benefit received or receivable;

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“deductible cost” in relation to any person comprises any amount of
expenditure, loss, or deduction by way of allowance, which in accordance
with the provisions of this Act is deductible in determining the taxable
income of that person;
“derived” includes earned by, accrued to, accumulated for, credited in
account to or for, provided to, conferred on, or dealt with on behalf of, the
person entitled to the amount or item referred to:
Provided that —
(a) in the case of any benefit conferred, the benefit shall be treated as
derived at the time or times it is conferred;
(b) in the case of any emolument payable to any person, save insofar as
is provided in section 23, the emolument shall be treated as being
derived at the time it is paid or is made available, and not at any
other time;
(c) in the case of any benefit of debt release, that benefit shall be
treated as derived when the benefit arises;
(d) any sum receivable in respect of any claim under an agreement
which provides for indemnity or guarantee shall be treated as
derived when it is paid;
(e) any sum by way of compensation or damages which is receivable
otherwise than under an agreement for indemnity or guarantee shall
be treated as derived at the time it is paid;
(f) any dividend in the form of bonus shares shall be treated as a
dividend only when those shares are disposed of; and
(g) in the case of the amount of any bonus distributed to a person by a
cooperative society which, pursuant to section 19(6) is gross
income of that person, the amount shall only be treated as derived
when it is paid;
“director” in relation to any company and any time includes any person
however described who in relation to that company is or was at the time
accustomed to act (whether alone or with others) in a managerial or
control capacity in accordance with the directions or instructions of the
persons who are in fact the directors;
“disposal” includes disposal by way of sale, transfer, or appropriation or
in any other manner whatsoever, and includes:
(a) any event involving the destruction of or irreparable damage to an
asset; and
(b) the transfer of an item to the executor or administrator or trustee of
a deceased estate, or by any such person to a beneficiary in that
estate;

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“disqualifying event” in relation to any company and the application of
the qualifying company provisions in section 26 means —
(a) any variation in the rights attaching to the shares in that company if
that variation does not apply universally and equally to each share
in that company;
(b) the issue of any shares of a class not already on issue, or the issue
of shares of a class already on issue but with rights which differ
from those already on issue;
(c) the acquisition of any shares in the company by a non qualifying
shareholder; or
(d) any change of shareholding which results in there being more than
7 shareholders at any time:
Provided that for this purpose, the executors or administrators or trustees
of a deceased estate holding shares in a qualifying company in their
capacity as such shall collectively be viewed as a single shareholder;
“dividend” in relation to any company and any shareholder in that
company includes any amount, and the market value of any item,
distributed or provided to the shareholder in that company or to a person
related to that shareholder, where that distribution is derived by that
person in their capacity as (or by reason of being, or a related person
being) a shareholder in that company:
Provided that —
(a) save insofar as adjustments be made by the Taxation Officer
pursuant to the anti-tax avoidance provisions of section 24, it shall
not include —
(i) the amount of any return of contributed capital or share
premium;
(ii) the amount of any realised capital profit which is distributed;
(iii) the amount of any bonus shares issued by the company where
these are funded by share premium or realised capital profit;
or
(iv) any distribution by any benevolent, religious, educational,
cultural or charitable bodies to embers of the community,
where those distributions do not represent consideration for,
or recognition of, services rendered by the individual who is
the recipient of the distribution;
(b) where the items distributed are bonus shares which constitute a
dividend, their value shall be the nominal value of those shares;
(c) where the item provided is the use of any company asset (including
money) —

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(i) the value of the benefit shall be taken to be the excess of the
market value of the benefit provided over the amount
contributed by or on behalf of the person enjoying the benefit
of the use of the company asset;
(ii) the value of the benefit shall be disregarded where and to the
extend that it is or (but for section 3(2)) would otherwise be
treated as an emolument for the purposes of this Act; or
(iii) the value of the benefit shall be disregarded in any case
where and to the extent that the cost of providing that benefit
has not being been claimed or has been specifically
disallowed as a deduction in arriving at the taxable income of
the company:
Provided that where the taxable income of the company is
determined pursuant to section 20 or 21, the cost of providing the
benefit shall be deemed to have been a deductible cost of the
company providing the benefit; and
(d) in the case of a pension or annuity payable by a pension scheme or
under a contract of insurance, the recipient person shall be deemed
to receive that in his capacity as a shareholder;
“emolument” means all amounts payable and the value of all benefits
provided in respect of, or in relation to, or arising out of, a relationship
involving any person holding a remunerated post or position; and without
in any way limiting the scope of the term, unless otherwise provided in
this definition, shall include:
(a) any wages, salary, bonus, allowance, leave pay, sick pay, payment
in lieu of leave, fees, commission, gratuity or other lump sum
payment (whether or not derived at the conclusion of a period of
employment) derived in respect of, relation to, or arising out of the
employment of any person;
(b) any amount derived by or the value of any benefit conferred on any
person:
(i) as compensation for the termination or variation of any
contract of employment;
(ii) as an inducement to enter into or leave employment, or to
accept any variation in terms of employment; or
(iii) by way of any compensation consequent upon any event
involving variations in the ownership, management or control
of the employer organisation or any person who is in relation
to the employer a related person;
(c) any amount of any personal debt of an employee (or of any person
who is in relation to that employee or a related person) to the extent

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to which it is settled by or by arrangement with the employer of that
employee, or it is forgiven and released; and
(d) any other amount or the value of any other benefit, advantage or
facility derived or conferred on any person in respect of, in relation
to, or arising out of that person’s employment or the employment of
a related person;
but shall exclude:
(e) any amount payable or the value of any benefit referred to in
Schedule 1 to the extent that the amount or the value of the benefit
is designated as exempt;
(f) any employer contribution to any approved fund in respect of any
employee of that employer:
Provided that in any case where the Taxation Officer, in his best
judgment objectively exercised, considers that any such
contribution is not a regular contribution and might reasonably be
viewed to some extent as an emolument or other gross income that
in all likelihood would otherwise have accrued to the employee (or
a person related to that employee), to that extent the contribution
shall be deemed to be an emolument; and
(g) any amount payable or the value of any benefit provided to a person
in the course of the conduct of a business undertaking conducted by
that person on his own account (whether or not in conjunction with
any other person);
“employment” means any relationship between two or more persons in
terms of which an emolument is payable by one such person to the other;
and “employer” and “employee” have corresponding meanings;
“exempt income” comprises any amount or the value of any benefit to the
extent to which it is exempt from income tax either:
(a) pursuant to Schedule 1 (as it applies at the time the gross income is
derived);
(b) pursuant to any tax treaty entered into in terms of section 84 in
force at the time that gross income is derived; or
(c) by reason of any other provision of this Act (including any
regulations issued pursuant to section 82);
“financial securities” includes:
(a) shares in the capital of any company; and
(b) debt securities of any kind;
“forbearance payments” mean any amounts payable for or in relation to
any person forgoing any right of action or other thing which, had it not

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been forgone, would or in all likelihood would have been, or would or in
all likelihood would have generated, gross income by way of interest,
knowhow, rent, royalties, or service fees;
“gross income” includes:
(a) all income, revenue, profits or gains (not being amounts of a capital
nature), of any kind whatsoever; and
(b) all amounts or the value of any benefits which in accordance with
section 9 are treated as gross income, whether or not they are of a
capital nature,
but does not include:
(c) any exempt income;
“incapacitated person” means any infant, person of unsound mind,
lunatic, idiot or insane person;
“income tax” includes any income tax (including any non resident
withholding tax) imposed by this Act, but shall not include any overseas
tax:
Provided that for the purposes of section 14 and Parts 6 to 9 inclusive it
shall also include —
(a) any penalties or fines applicable to any default or for any offence
under this Act;
(b) any amount of interest imposed under the Act on any income tax,
penalty or fine which was not paid within the time required by the
Act;
(c) any amounts required to be paid by way of provisional tax; and
(d) any amount which is required to be withheld or collected at source
in accordance with section 37;
“income tax value” in relation to any capital asset and any person at any
time is the cost price of that asset to that person, reduced by the aggregate
amount of depreciation calculated by that person under:
(a) the provisions of Schedule 2; and
(b) the provisions of Schedule 3 of the Income Tax Act 1982
up to the time that the income tax value is determined;
“interest” (in the context of gross income) includes:
(a) any interest, discount or other income or gain in relation to money
lent, advanced, credited or otherwise let out; or
(b) unless the Minister otherwise determines by regulation, any gain
arising in relation to any financial securities (other than shares in
the capital of a company) of whatever kind;

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“knowhow” means any amount payable for:
(a) the supply of commercial, scientific or other knowledge; or
(b) for assistance in relation to the use or right to use any such
knowledge, wherever such knowhow is provided;
“liability to income tax” (or “income tax liability”) in relation to any
person and any year means the personal income tax liability determined in
accordance with section 5 and:
(a) where section 63 so provides; or
(b) where the context so requires,
also includes —
(c) any liability to withhold or collect and account for income tax in
accordance with section 37; and
(d) any liability for interest, penalty or fines imposed by or under this
Act;
“local authority” means any local authority established under the Local
Government Act, or any Act for the time being in force amending or
repealing it;
“market value” in relation to any item or service at any time is the
consideration which persons dealing with each other at arm’s length at that
time in like or comparable circumstances would in or likelihood have
agreed upon if those persons were a willing buyer and a willing seller:
Provided that, on application in writing by any person, the Secretary, if he
considers it appropriate to do so, may determine that for the purpose of
this Act, the market value of any item or service shall be some other
value, if all persons party to that transaction or event have first agreed in
writing to the adoption of that other value;
“mitigating circumstances” are those situations which give rise to an
offence under this Act as are, in the opinion of the Minister beyond the
reasonable understanding or control of the person who would otherwise be
charged with an offence, or beyond that person’s reasonable capacity to
understand:
Provided that an insufficiency of funds shall not be a mitigating
circumstance;
“non qualifying shareholder” in relation to any company and any time
means:
(a) a non resident;
(b) a trustee of a trust (other than a trustee of a deceased estate in his
capacity as such);

Section 2 Income Tax Act 1992

Act 5 of 1992 Page 20


(c) a company; or
(d) the Crown;
“non resident” means any person who, at the relevant time, is not resident
in Tuvalu;
“non resident withholding income” comprises gross income from a
source within (or deemed to be within) Tuvalu, which is by way of, or in
the form of:
(a) dividend;
(b) forbearance payments;
(c) interest;
(d) knowhow;
(e) rent;
(f) royalty;
(g) service fees; or
(h) specified alimony payment,
where such is derived by a person who, by the of derivation, is a non
resident, but shall not include any such amount which is exempt income;
“non resident withholding tax” is the income tax required to be withheld
or collected at the rate specified in Schedule 5 to this Act from or in
relation to any amount of non resident withholding income payable;
“notice of assessment” in relation to any person and any year means a
notice which has been issued setting out particulars of a person’s taxable
income, related income tax liability, tax settlements, and that person’s
residual income tax liability at the time of issue, and where appropriate,
includes (with any necessary modifications):
(a) any notice of amended assessment.
(b) any notice of default assessment; and
(c) any notice of determination of loss;
“overseas tax” means the amount of any tax in the nature of the income
tax imposed under this Act which is charged under any law in force in an
country other than Tuvalu on any amount or value included in the person’s
gross income for the relevant period:
Provided that in no case does it include any amount of interest, penalty or
fine in relation to that liability or related matters;
“paid”, in relation to any person, includes paid —
(a) distributed to or on behalf of that person;
(b) credited in account or dealt with on behalf of that person;

Income Tax Act 1992 Section 2

Act 5 of 1992
 Page 21

(c) made or becomes available to that person; and
(d) provided to or conferred upon that person,
and “pays” and “payable” and “payment” have a corresponding
meaning, with the “payee” being the person who is entitled to the
payment, an “payer” having a corresponding meaning;
“passive investment income” means gross income by way of interest,
dividends, royalty, rents or otherwise, where the derivation of that income
is the natural consequence of holding the related asset, and not the result
of significant personal effort for or on behalf of the holder;
“permanent place of abode” in relation to any person includes the
location which is that person’s usual habitual home, having regard to that
person’s personal and economic circumstances and interests, and to any
other relevant circumstances;
“person” includes a company, an any executor, administrator or trustee of
any trust or deceased estate (in their individual and collective capacity as
such);
“post business income” means any amount, or the value of any benefit,
derived by any person after the cessation of a business previously
conducted by that person, where that amount or the value of the benefit,
had it been derived prior to that cessation, would have been gross income
from that business:
Provided that —
(a) the term shall also include the market value of any trading stock
held at the time of cessation where the cost was claimed as a
deductible cost on acquisition by or introduction into the business;
and
(b) the term shall not include any amount, or the value of any benefit,
arising or dealt with pursuant to section 23(8) or section 22(2);
“prescribed rate of interest” in relation to any period of time means the
relevant rate of interest prescribed in Schedule 7 as being the rate for each
month or part of a month that falls within that period, or any other rate
prescribed by regulation in lieu of the rate or rates so prescribed;
“provisional tax” in relation to any person and any year means any
amount of income tax (not being amounts withheld or collected at source
or which otherwise stands to that person’s credit) which pursuant to
section 53 and section 54 is required to be paid on account of that person’s
liability for income tax for that year;
“qualifying company” means, in relation to any company and any year, a
company in respect of which there is in relation to that year a valid
election in force in accordance with section 26;

Section 2 Income Tax Act 1992

Act 5 of 1992 Page 22


“related persons” (or “persons related” to each other) are any two or
more persons who, at the relevant time, have a significant association with
each other, whether by reason of:
(a) being a relative;
(b) being engaged in a partnership, joint asset ownership, in
arrangements or events related to or arising out of that association;
(c) being two or more companies where, in the aggregate for any given
type of interest in relation to each of those companies, that type is
beneficially held in any combination for or by:
(i) the same shareholder; and
(ii) persons who are in relation to any of those shareholders, a
related person,
to the extent of 25% or more of interests;
(d) a relationship involving a company and a shareholder (not being a
company) where the aggregate of any particular type of interest in
relation to that company which are beneficially held in any
combination for or by:
(i) that shareholder; and
(ii) persons who are in relation to that shareholder a related
person,
amounts to 25% or more of the total of such interest;
(e) being a trustee or nominee for any person or persons where any one
of those persons would be a related person in terms of this
definition; or
(f) a decision of the Taxation Office who, having regard to all the
relevant circumstances, in his best judgement objectively exercised,
considers that such persons should be treated as persons in relation
to any one or more arrangements, circumstances or events, by
reason or the pattern of association which prevailed, or will in all
likelihood prevail, at the relevant times or times;
“relative” in relation to any person means:
(a) any spouse, child, adopted child or foster child of that person; and
(b) any other person (and the spouse of any other person) where that
other person is related to the person within two degrees on
consanguinity;
“rent” means any charge or payment including any premium or
inducement or other payment for or in relation to the hire or use or right to
hire or use any property of any kind, wherever located, but shall not
include any charge or payment which is a royalty;

Income Tax Act 1992 Section 2

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 Page 23

“resident”, in relation to any person and any time in any year, means:
(a) in the case of a company —
(i) a company incorporated, formed or established in Tuvalu;
and
(ii) any other company which is at the time controlled (in any
way whatsoever), or has its centre of management or
administration in Tuvalu;
but in either case shall not include any company incorporated,
formed or established outside Tuvalu where the company is merely
registered in terms of the provisions of any statute in Tuvalu;
(b) in the case of a person who is an individual —
(i) any person whose permanent place of abode is at the time in
Tuvalu; and
(ii) any person personally present in Tuvalu for more than 183
days in any 12 month period, from the first day of such
presence and thereafter until he ceases to be resident in either
case, whether or not that person is also resident in or has a
permanent place of abode in another country; and that person
shall cease to be resident from the later of:
(iii) the date the person ceases to have a permanent place of
abode in Tuvalu; and
(iv) there the person has left Tuvalu, and has been personally
absent for more than 183 days in any 12 month period, from
the first day of such absence,
and thereafter until the person again becomes a resident:
Provided that for the purpose of this part of the definition —
(v) where any merchant or naval seaman is absent from Tuvalu
under a contract of maritime service of 12 months or more,
he shall be deemed not to have a permanent place of abode in
Tuvalu for the duration of that contract;
(vi) the fact that a person’s family or extended family have their
permanent place of abode in Tuvalu shall not automatically
determine whether that person’s permanent place of abode is
in Tuvalu;
(vii) references in this definition to a “day” include any part of a
day; and
(viii) where:
(aa) a person is resident in Tuvalu solely by reason of
paragraph (b)(ii) of this definition;

Section 2 Income Tax Act 1992

Act 5 of 1992 Page 24


(bb) his presence was largely accountable to the
undertaking of services to or for the Crown or a
statutory corporation for period not exceeding two
years; and
(cc) the person retains a permanent place of abode and tax
residence in another country;
then:
(dd) the Minister may determine that the person is not a
resident of Tuvalu for the duration of that presence.
(ee) in the case of any deceased estate, the estate of an
individual at the time of his death, was resident in
Tuvalu; or
(ff) in the case of any trust estate (not being a deceased
estate), where any trustee is resident in Tuvalu;
“residual income tax” in relation to any person and any year means so
much of the amount of the person’s personal income tax liability for that
year as has not been accounted for by way of tax settlements made by the
end of February in the immediately succeeding year (or where the person
has had a substituted reporting period approved, any later date which the
Secretary has approved for this purpose);
“revenue asset” means any asset where that asset:
(a) is not a capital asset (as defined);
(b) but for section 18(5) would not be trading stock; and
(c) the proceeds of disposal of that asset will be treated as gross
income, and includes any asset referred to in section 19(2) and
section 19(3) where the Secretary has not otherwise determined
pursuant to those sub-sections:
Provided that the term shall not include any interest as a member in a
pension, provident, superannuation or benefit fund;
“royalty” means any amount to the extent that it is payable in relation to
the use of or right to use any intangible property, or for assistance in
relation to the use of or right to use any such property;
(a) wherever such use or right to use occurs or is exercised; and
(b) whether or not the amount is on account of the purchase price of the
property;
“Secretary” means the person who, at the relevant time, holds the post of
Secretary of Finance within the Government of Tuvalu, or is officially
acting in that capacity;

Income Tax Act 1992 Section 2

Act 5 of 1992
 Page 25

“service fees” comprise any fees or other charges (not being charges by
way of interest, knowhow, rent or royalty) payable by any person for the
provision of advice, assistance, management, administration, work or
other service or thing (not being the supply of goods) done by a non
resident, where the cost of that service:
(a) is borne by that person; and
(b) either —
(i) is claimed as a cost in arriving at that person’s taxable income
in accordance with this Act (or could have been claimed were
the expenditure not capital expenditure or expenditure of a
capital nature);
(ii) relates to a business or part of a business of that person and
the taxable income of that business or relevant part is
determined on the special basis provided in section 20; or
(iii) relates to an activity by the Crown or a statutory corporation
or a local authority:
Provided that service fees shall not include:
(c) any such amount which is wholly a reimbursement of actual costs
incurred by the non resident for the benefit of that person:
Provided that this exclusion shall not apply to any such costs
incurred by the non resident which originate directly or indirectly in
charges from a person who is, in relation to the non resident, a
related person where and to the extent that the Secretary considers
that in the circumstances of the case, that exclusion is inappropriate
or inequitable;
(d) any amount for services rendered personally to any resident during
a period that the resident was outside Tuvalu;
(e) emoluments which are subject to the withholding of income tax
pursuant to section 37; or
(f) any amount or the value of any benefit which is exempt income;
“shareholder” in relation to any company includes —
(a) any person who has a beneficial interest in the capital or profits of a
company, whether or not:
(i) that person holds shares in that company; or
(ii) the interest is held indirectly through one or more interposed
companies or by nominees; and
(b) any person who is a member of a company,
and for this purpose:
(c) the crown shall be viewed as a single shareholder; and

Section 2 Income Tax Act 1992

Act 5 of 1992 Page 26


(d) capital includes any funds contributed for or on behalf of members
of the company by way of capital contribution;
“source deduction payment” means any amount or the value of any
benefit where there is an obligation for income tax to be withheld or
collected and accounted for at source;
“specified alimony payment” means any amount paid by way of alimony
or allowance under a decree of divorce, a dissolution of marriage, or any
legal order or deed of separation or maintenance, where the amount paid
has had the correct amount of income tax withheld or collected at source
and accounted for in accordance with section 37;
“specified circumstance” means any situation where, in relation to any
person, the Taxation Officer, in his best judgement objectively exercised,
considers that:
(a) there has been an arrangement in relation to which a party to the
arrangement had as an objective of relative significance the
avoiding, deferring, or altering the incidence of income tax by any
means whatsoever;
(b) transactions have been entered into between any two or more
persons, whether or not related persons, on a basis which, having
regard to all the relevant circumstances, may be viewed as not
being on sufficiently arm’s length terms;
(c) there has been a disposition of any share or shares in a company in
circumstances where it is reasonable to infer that a significant
objective underlying the arrangement or transaction was to provide
the vendor or a person related to the vendor with the opportunity to
avoid deriving any prospective or possible future distribution of all
or any profits or future profits of the company where that
distribution would have been subject to income tax in the hands of
the vendor;
(d) any asset of a business has been disposed of by a person otherwise
than at market value, if and to the extent that the disposition has not
been dealt with either:
(i) by an appropriate adjustment to the taxable income of the
business; or
(ii) in any case where that person is a company, and an
appropriate adjustment has not been made, as a dividend;
(e) a person resident in Tuvalu directly or indirectly (and whether or
not through any interposed company, trust or other entity) has either
personally or together with related persons control (or de facto
control) of any company;

Income Tax Act 1992 Section 2

Act 5 of 1992
 Page 27

(f) a person is in any way under the legal or de facto control of any
other person or persons who at the relevant time or times were non
resident; or
(g) any venture involves participation by a person or persons who are
non resident,
and for the purpose of this definition, in determining the objectives
of any person regard shall be had to any knowledge he or his agent
or advisors or a related person had or might reasonably be expected
to have had;
“specified level of taxable income” in relation to any person (being an
individual) and any year is the level of taxable income determined by the
formula:
a/b x c
where:
– ‘a’ is the amount of rebate per week specified in paragraph 2 of
Schedule 6
– ‘b’ is the rate of income applicable to the taxable income of that
person in that year, that rate being expressed as a decimal
– ‘c’ is the number of complete the person is eligible for that weekly
rebate, pursuant to paragraph 2 of Schedule 6
being:
(a) the level of taxable income which triggers the automatic need for
that person to furnish an annual return of income in accordance
which triggers the automatic need for that person to furnish an
annual return of income in accordance with section 41; and
(b) the upper limit of taxable income which may be derived by that
person without any income tax liability (as contemplated by the
provisions of Schedule 6);
“spouse” includes a de facto spouse, and where the context so requires, a
former spouse;
“substituted reporting period” is any alternative reporting period
approved by the Secretary in accordance with section 6 of this Act;
“taxable income” means gross income less deductible costs;
“Taxation Officer” means the person who is, at the relevant time, the
senior person appointed by the Minister pursuant to section 77 to assist the
Secretary with his responsibilities under this Act;
“tax settlements” in relation to any person and any year include:

Section 2 Income Tax Act 1992

Act 5 of 1992 Page 28


(a) income tax withheld at source from gross income derived by that
person in that year;
(b) provisional tax payments in person’s liability to income tax for that
year; and
(c) any other payments made or credits available in respect of that
person’s liability to income tax for that year,
but shall not include —
(d) the amount of any overseas tax credit required to be taken into
account in arriving at the person’s income tax liability; or
(e) any payment of, or to the extent it is appropriated in payment of,
any amount of —
(i) interest or penalty payable, or fine imposed, by or under this
Act; or
(ii) income tax which is required to be accounted for by that
person and which was not paid to the Crown by the final date
for payment in either case, being an amount payable by the
person in the same capacity as that in which the liability
arose;
“throughout” in relation to any person and any business or any part of
any business where this Act requires or allows a special approach to the
determination of a person’s taxable income, means the category of
transactions which, pursuant to section 20 or 21, have been prescribed as
forming the basis of calculating that person’s gross income from that
business or any part thereof;
“trading stock” in relation to any person includes any item (including
livestock) which have been acquired, manufactured, fabricated,
constructed, processed or otherwise made or procured by the person for a
purpose of sale or other disposal in the course of any business, and
include:
(a) any physical work in progress or work under construction, whether
or not legal ownership in the work remains with the person or has
passed to another party; and
(b) any revenue asset to which section 18(5) refers;
“value of throughput” in relation to any person and any year means the
amount arrived at by applying to the aggregate amount of throughput of
that person for that year the relevant fixed percentage prescribed in
Schedule 4;
“venture” includes any business or other venture, other than employment,
where there is a reasonable element of commercial risk, and whether
pursued by a single person or 2 or more persons together;

Income Tax Act 1992 Section 3

Act 5 of 1992
 Page 29

“working day” means any day which is not a public holiday, or a
Saturday or a Sunday;
“year” means the calendar year:
Provided that where, pursuant to section 6, a person prepares annual
financial accounts an related records of any business for a substituted
reporting period, the year to which the taxable income of that person from
that business shall be attributed shall be determined in accordance with
that section.
3 Interpretation of the Act.
(1) There shall be a presumption that the provisions of this Act shall operate
so as not to allow any incidence of economic double taxation, and not
cause any amount of gross income to be taxed directly in the hands of the
same person more than once (whether under any one or more provisions
of the Act).
(2) In any case where a dividend is derived by any person is also gross
income of another type, for the purposes of this Act it shall be treated
solely as a dividend.
(3) There shall be a presumption that the provisions of this Act shall not
operate to allow any person to claim the same expenditure more than
once, whether under any one or more provisions of the Act.
(4) Notwithstanding anything in this Act, where the Taxation Officer in
consultation with the Secretary considers that there is genuine cause for
doubt as to the true interpretation of any provision of this Act (including
any Regulations issued and in force), the Taxation Officer shall:
(a) if the general tenor and apparent intent of the legislation is not in
reasonable doubt, apply the relevant provision in accord with that
general tenor and apparent intent of the legislation; or
(b) in any other case, allow the contra fiscum rule to apply.
(5) Unless the context otherwise requires, any references made to this Act
include references to:
(i) the Schedules to this Act;
(ii) any Regulations issued; and
(iii) any judicial decisions made in accordance with the
provisions of this Act.

Section 4 Income Tax Act 1992

Act 5 of 1992 Page 30


4 Binding interpretations in relation to circumstances in which certain
provisions may apply
(1) This section authorises the Minister to issue to a person binding rulings as
to the approach or interpretation to be adopted by the Crown in applying
the anti-tax avoidance provisions listed in sub-section (2), to
circumstances, arrangements or relationships advised by or on behalf of
that person.
(2) The anti-tax avoidance provisions to which subsection (1) refers are:
(a) definitions of ‘related persons’ and ‘specified circumstances’ in
section 2;
(b) section 14(2) (being the discretionary prohibition of deductions);
(c) section 24 (being the general anti-tax avoidance provision);
(d) any other provision of this Act which the Minister considers to be
essentially an anti-tax avoidance provision; and
(e) any provision of the Act where the Minister is empowered to vary
the tax treatment of any arrangement if he so determines;
and in this section, those sections or provisions are collectively referred to
as the ‘relevant provision’.
(3) On receipt of any written application from or on behalf of any applicant,
setting out all relevant facts and circumstances, including particulars of all
the parties involved and affected, the Minister shall consider whether it is
appropriate that the applicant be charged a fee for the issue of the
requested determination, and if so, shall advise the applicant of the
amount (if any) to be paid to be to the Crown by way of fee.
(4) On the payment of the required fee (or if no fee is required, on deciding
accordingly) the Minister shall with the consent of Cabinet first obtain, in
relation to any current or future years confirm in writing to the applicant
how he has determined that the relevant provision will be applied to the
persons affected by the arrangement in the circumstance or set of
circumstances advised to him.
(5) Where any written determination is contemplated by sub-section (4) is
given to the applicant, it will be binding on the Crown in relation to the
person or persons covered by the application insofar and for so long as the
advised circumstances prevail, or the ruling becomes time expired.
(6) Any written determination contemplated by this section:
(a) will be void and of no affect if there is any material
misrepresentation to the Minister of particulars, or the
circumstances which prevail differ in any material respect from
those upon which the determination was based; or

Income Tax Act 1992 Section 5

Act 5 of 1992
 Page 31

(b) may be altered or cancelled by the Minister prospectively to
arrangements entered into or implemented or concluded (whether or
not pursuant to any pre-existing arrangement) from a date no earlier
than the commencement of the next succeeding year,
and written notification of the relevant occurrence shall be given to the
person or persons to whom the determination related, or to his or their
agent or the original applicant.
(7) Any decision of the Minister to treat any determination made under sub-
section (4) as void and of no effect shall be subject to objection and appeal
procedures in accordance with the provisions of this Act.
(8) Any decision of the Minister to alter or cancel prospectively any
determination made under sub-section (4) shall not be subject to the
objection and appeal procedures in this Act.
PART 2 – LIABILITY TO INCOME TAX
5 Personal liability to income tax
(1) Each person who for any year derives taxable income shall (subject to the
provisions of section 38), be personally liable for income tax on the
aggregate of that taxable income.
(2) The amount of income tax for which any person is liable in terms of sub-
section (1) shall be:
(a) the amount calculated in the manner and at the rates prescribed in
Schedule 6;
reduced by:
(b) in the case of an individual the amount of any rebates prescribed in
Schedule 6 (being rebates to which that person is entitled); and
(c) the amount of any credits for overseas tax to which that person is
entitled pursuant to section 27.
6 Accounting periods not coinciding with calendar year
(1) Where any person or persons carry on any business, that person or those
persons may seek approval from the Secretary for an annual reporting date
other than 31st December, or for an annual reporting date other than that
previously approved as the last day of a substituted reporting period, in
relation to that business.

Section 6 Income Tax Act 1992

Act 5 of 1992 Page 32


(2) The Secretary shall consider any application made pursuant to sub-section
(1), and may give his approval to a substituted annual reporting date if the
person or persons:
(a) ordinarily, or will ordinarily, account for the annual results of the
business to the annual reporting date requested;
(b) that date is or is to be observed, on an ongoing basis:
(i) for bona fide commercial reasons; or
(ii) in the case of a non resident, by reason of statutory
requirements in the person’s or persons’ country of residence;
and
(c) in all the circumstances, the Secretary considers that:
(i) the requested annual reporting date is appropriate; and
(ii) the person or persons do not thereby enjoy any untoward
advantage under this Act.
(3) Where the Secretary gives approval to any request made under sub-section
(1), that approval shall be notified in writing to the applicant and state the
first reporting period for which the substituted annual reporting date is to
take effect, and the business from that year on determine its annual
taxable income for that approved substituted reporting period.
(4) Where the annual reporting date in relation to any business is prior to 1
July in any year, notwithstanding anything in this Act, the taxable income
determined shall be taken as taxable income of the person or persons for
the year ended the preceding December.
(5) Where the annual reporting date for any business ends with a date after 30
June, notwithstanding anything in this Act, the taxable income determined
shall be taken as taxable income of the person or persons for the year
ended the succeeding December.
(6) Where for any reason the ending with any approved reporting date in
relation to any business and any person covers a period greater or less
than 12 months, the Taxation Officer shall determine (if any) adjustments
are required in the determination of taxable income or income tax
payment obligation for that year so as to reflect fairly the effect of the
longer or shorter reporting period.
(7) Where in terms of this section, the Secretary approves a substituted annual
reporting date for any business and any person:
(a) the final date for the filing of that person’s annual return of income
shall be as provided in section 41; and
(b) where the Secretary has approved an annual reporting date which
ends between 1 January and 30 June, the Secretary shall determine
whether it is appropriate to alter the final dates by when that person

Income Tax Act 1992 Section 7

Act 5 of 1992
 Page 33

shall be required to effect payments of provisional tax and residual
income tax, and notify the person accordingly.
PART 3 – DETERMINATION OF TAXABLE INCOME
7 Requirement to include gross income in taxable income.
(1) Subject to the provisions of this Act, if at the time that any gross income is
derived by any person, that person is:
(a) resident in Tuvalu, he shall include that gross income in his taxable
income for that year only if it is derived from a source within (or
deemed to be from a source within) Tuvalu; and
(b) not resident in Tuvalu, he shall include that gross income in his
taxable income for that year only if it is derived from a source
within (or deemed to be from a source within) Tuvalu.
8 When gross income is to be regarded as having a source within
Tuvalu.
(1) Gross income will be regarded as having a source within Tuvalu if:
(a) it is derived within Tuvalu;
(b) it is a specified alimony payment;
(c) it is an emolument earned in, or in respect of a period of service in,
Tuvalu;
(d) it is non resident withholding income which constitutes interest, and
the interest relates to monies lent in, or used in, Tuvalu;
(e) it is non resident withholding income which constitutes either rent,
royalty, knowhow, forbearance payment or service fees, where the
payment was made by a resident, or some person is entitled to treat
the amount as a deductible cost in terms of this Act; or
(f) it flows from any other arrangements entered into in Tuvalu, or
wholly or partly performed within, Tuvalu:
Provided that where this paragraph applies, if the gross income is
attributable to activity or other factors both within and outside Tuvalu,
then only so much of the gross income as the Taxation Officer (in
consultation with the Secretary) considers, in his best judgement
objectively exercised, to be fairly attributable to a source within Tuvalu,
shall be treated as being from a source within Tuvalu.

Section 9 Income Tax Act 1992

Act 5 of 1992 Page 34


(2) No part of any dividend distribution by a company which is not resident in
Tuvalu shall be regarded as having a source within Tuvalu
notwithstanding that it may comprise profits which were derived wholly
or partly in Tuvalu.
9 Items specifically included within the term ‘gross income’.
(1) Without in any way limiting the scope of the term ‘gross income’ (as
defined in section 2), paragraph (b) of that definition shall include all
amounts or the value of any benefits derived which are:
(a) amounts or benefits specifically deemed to be gross income in
terms of this Act;
(b) an annuity;
(c) a benefit of debt release;
(d) business profits or gain;
(e) a dividend;
(f) an emolument;
(g) a forbearance payment;
(h) interest;
(i) knowhow;
(j) a pension;
(k) post business income;
(l) proceeds of disposal of revenue assets;
(m) recoveries (whether by way of indemnity or otherwise) of any
amount which constituted a deductible cost;
(n) recoveries of debts previously written off and treated as a
deductible cost in any year;
(o) rent;
(p) royalty;
(q) service fees;
(r) specified alimony payments;
(s) value of throughput.
(2) No amount or benefit of the type referred to in the previous sub-section
requires to be included in gross income where it is exempt income.
(3) Where any emolument is a benefit, advantage or facility conferred on any
person by reason of any other person being an employee, the value of that

Income Tax Act 1992 Section 10

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 Page 35

benefit, advantage of facility shall be treated as gross income of the
employee and not of the person in whom it was conferred.
(4) For the avoidance of doubt, the following categories of capital receipt do
not constitute gross income:
(a) contributions received by any pension, provident, superannuation or
benefit fund from or in relation to its members;
(b) the proceeds of any policy of life or accident insurance, except to
the extent that:
(i) the benefits payable represent compensation for loss of
earnings; or
(ii) the Taxation Officer, in his best judgement objectively
exercised considers that having regard to the nature and
terms of the policy, the benefits payable should more
properly be treated as being similar to a return on a term
deposit with a financial institution; and
(c) compensation for death or injuries, except to the extent that the
benefits payable take the form of compensation for loss of earnings.
(5) Where:
(a) any gross income is a source deduction payment, the amount to be
included in gross income is the amount prior to any deductions
from that gross income on account of income tax (or otherwise);
and
(b) any gross income has been subject to deduction of overseas tax at
source, the amount to be included in gross income is the amount
prior to any such deduction for overseas tax (or otherwise).
10 Special provisions relating to pre-incorporation contracts
(1) Where any company first comes into existence and prior to that event a
contract had been entered into for its benefit, that contract shall be viewed
as a pre-incorporation contract and the provisions of this section shall
apply.
(2) Where any company:
(a) is a resident of Tuvalu; and
(b) ratifies a pre-incorporation contract within a period of 6 months
from the date of such incorporation, establishment or formation (as
appropriate),
unless that company otherwise elects in writing at the time of furnishing
its annual return of income for the year in which ratification occurs, any
gross income arising from or by reason of the contract or the matters

Section 11 Income Tax Act 1992

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covered by the contract shall be deemed to have been derived by the
company as if it had existed at the time the gross income arose.
(3) Where any company has either:
(a) ratified a pre-incorporation contract but at the time is not (or was
not at the time) a resident of Tuvalu;
(b) ratified a pre-incorporation contract later than 6 months from the
date of incorporation, establishment or formation (as appropriate);
(c) fails to ratify a pre-incorporation contract entered into for its
benefit; or
(d) ratifies the pre-incorporation contract within 6 months but makes
the election referred to above,
any gross income arising from or by reason of the contract shall be treated
as having been derived by the persons who in law would have been the
parties entitled to the gross income had the contract not been ratified.
11 Authority to claim deductible costs as a deduction from gross
income.
Where, in relation to any person and any year, that person is required to include
gross income in the calculation of his taxable income for that year, in the
arriving at the amount of that taxable income, he shall be entitled to claim a
deduction for a deductible costs.
12 Authority to treat expenditure as deductible costs.
Save as otherwise provided in this Act, in relation to any person and any year,
expenditure incurred by that person in that year will constitute a deductible cost
to the extent that it is incurred in the production or gaining of gross income or is
incurred in the conduct of any business for the production or gaining of gross
income in any year.
13 Certain losses and allowances deemed to be expenditure.
(1) Where in relation to any year a person:
(a) suffers a loss (including a loss by way of bad debt) which is not
otherwise taken into account, whether directly or indirectly, in
arriving at the person’s taxable income for any year; or
(b) is eligible to claim depreciation with respect to capital assets in
accordance with Schedule 2,
then for the purpose of this Act —

Income Tax Act 1992 Section 14

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 Page 37

(c) that loss shall be deemed to be expenditure incurred as at the date of
that loss; and
(d) the depreciation which he is eligible to claim for that year shall be
deemed to be expenditure incurred progressively over the course of
those months in that year during which the asset was used as
required, month by month.
(2) Where in relation to any year a person is entitled to any investment
allowance in accordance with Schedule 3, that allowance shall be deemed
to be expenditure incurred as at the date the related asset was first used by
the person in the course of the production or gaining of gross income or in
the conduct of any business for the production or gaining of gross income
in any year:
Provided that if the related asset is disposed of within 12 months of the
first use, any such investment allowance that would have been available to
the person shall be deemed not to have been available and not to have
been expenditure incurred.
14 Circumstances in which no deduction shall be allowed for
expenditure
(1) In relation to any person and any year, a deductible cost shall not include
any expenditure where and to the extent that:
(a) the deduction is specially prohibited by any provision of this Act;
(b) the gross income to which it relates is non resident withholding
income and pursuant to section 38 and Schedule 5, the applicable
income tax liability is ultimately determined solely with reference
to the income tax to be withheld or collected at source; or
(c) it is a dividend.
(2) Except as specified in section 15, in relation to any person and any year, a
deductible cost shall not include any expenditure where and to the extent
that:
(a) it relates to a business (or any part of a business) the gross income
of which is required by this Act to be determined exclusively with
reference to the value of throughput; or
(b) the Taxation Officer in his best judgement objectively exercised
considers that in all the circumstances of the case, it is not
appropriate for a deduction to be allowed, and the Secretary has
formally concurred with that decision.
(3) Except as specified in section 15, in relation to any person and any year, a
deductible cost shall not include any expenditure to the extent to which:

Section 14 Income Tax Act 1992

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(a) it is of a capital nature, or is an investment of capital or is
expenditure on the acquisition of capital asset:
Provided that where the expenditure relates to an asset the disposal
of which will give rise to gross income:
(i) nothing in this provision shall preclude the cost of that asset
(insofar as it has not already constituted a deductible cost to
the person) from being taken into account in the
determination of the gain or loss on disposal of that asset; or
(ii) there shall be no recapture of any amount of depreciation
treated as a deductible cost insofar as the cost of that asset
has been reduced by that amount in the determination of the
gain or loss on disposal of that asset,
(b) it is recoverable under any guarantee or indemnity of whatever
kind;
(c) it relates to the derivation of any emolument;
(d) it comprises income tax (including any interest, fine or penalty
imposed by or under this Act);
(e) it relates to the derivation of exempt income;
(f) it is of a private or domestic nature:
Provided that when the person is a company, expenditure which is
incurred otherwise than directly in the production or gaining of gross
income or for the purpose of the business of the company shall be deemed
to be expenditure of a private or domestic nature;
(g) it represents a provision or a reserve or (except as provided in this
Act) is expenditure that has not been incurred;
(h) it is a gift or similar voluntary contribution.
(4) Except as specified in section 15, in relation to any person and any year, a
deductible cost shall not include any expenditure to the extent to which it
either:
(a) represents the amount of (or part of) an unrecovered debt, except to
the extent that —
(i) that amount of debt was incurred in the conduct of a
business;
(ii) the amount of debt was written off as an expense in the
accounts of that business for that year, and
written out of any related accounting records maintained by that
person for that year;
(iii) as at the end of that year the amount of debt could reasonably
be regarded as irrecoverable; and

Income Tax Act 1992 Section 15

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 Page 39

(iv) that amount of debt had previously been included in the
person’s gross income for any year;
(b) represents the amount of (or part of) an unrecovered debt, except to
the extent it arose as a result o advances made by a person as part of
a business of banking or lending or similar to the extent that:
(i) an amount of that debt has been written off as an expense in
the accounts of that business for that year, and written out of
any related accounting records maintained by hat person for
that year; and
(ii) as at the en of that year that amount of debt could reasonably
be regarded as irrecoverable; or
(c) relates to a loss incurred by that person under any guarantee or
indemnity given by him, unless that guarantee or indemnity was
given as a natural incident of a business conducted by that person
and which involves the provision of such guarantees or indemnities.
15 Expenditure which is deemed to be a deductible cost.
(1) Notwithstanding sections 14(2) to 14(4), except as provided in this
section, the following outgoings will be treated as a deductible cost:
(a) any sum contributed to an approved fund:
Provided that where the contribution is not an ordinary annual
contribution, the Secretary may in his discretion direct that the
deduction of the sum be spread over a number of years;
(b) any expenditure of a capital nature incurred on scientific or other
research in relation to a business conducted in Tuvalu:
Provided that the amount of the deduction which may be allowed
shall be limited to such sum as the Secretary considers reasonable,
and he may require all or some of that amount to be spread over a
number of years;
(c) any amount paid by way of a specified alimony payment; and
(d) any expenditure necessarily incurred by a person in pursuing
objection and appeal proceedings under this Act.
(2) Where any expenditure would be treated as a deductible cost but for the
provisions of sections 14(2)(a) or 14(3)(e), except as provided in this
section, that expenditure will be treated as a deductible cost to the extent
that:
(a) the expenditure constitutes interest or other borrowing costs to fund
the acquisition or retention of shares in a resident company; and

Section 16 Income Tax Act 1992

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(b) the expenditure constitutes interest or other borrowing costs to fund
the acquisition or retention of shares in a non resident company,
where either —
(i) the Secretary has determined in advance that a deduction
should be allowed on the basis of it being in the economic
interests of Tuvalu; or
(ii) the Secretary is satisfied that the expenditure fairly relates to
amounts which are included in the person’s gross income
consequent upon the application of section 24.
(3) Where:
(a) any expenditure incurred by any resident company is expended for
the benefit of any other resident company;
(b) at the time the expenditure is incurred, all the interests in and in
relation to the capital and profits of both companies are 100%
commonly held; and
(c) but for this sub-section, the expenditure would not be treated s a
deductible cost to the company which incurred the expenditure but
it would have been a deductible cost in determining the taxable
income of the other company had it been incurred by that other
company; then,
(d) that expenditure will be treated as a deductible cost to the company
which incurred the expenditure.
(4) Save insofar as the Secretary considers appropriate in the circumstances,
no deduction shall be allowed under this section to any person who is a
non resident at the relevant time.
16 Special provisions relating to the determination gains and losses.
Where any gains or losses of any arrangement or activity constitute gross
income, these are to be dealt with by identifying the component gross income
derived and the associated deductible costs incurred, and recognising those
components in the manner contemplated by this Act.
17 Need for allocation and apportionment.
(1) Where any amount or the value of any benefits received or derived
constitute gross income, and comprise two or more elements which need
to be treated separately or differently by the requirements of this Act, such
amounts or values shall:
(a) so far as practical, the allocated between those elements according
to the factual circumstances;

Income Tax Act 1992 Section 18

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 Page 41

(b) insofar as they cannot be so allocated, shall be apportioned between
relevant elements on a basis which is appropriate in the
circumstances.
(2) Where any amount of expenditure comprises two or more elements which
need to be treated separately or differently by the requirements of this Act,
that amount shall:
(a) so far as practical, be allocated between those elements according to
the factual circumstances; and
(b) insofar as they can be so allocated, shall be apportioned between
relevant elements on a basis which is appropriate in the
circumstances.
(3) For the purposes of sub-section (2) where the expenditure relates directly
to the use of an asset (including borrowed monies), regard shall be had
only to the use to which that asset was put over the period to which the
expenditure relates.
18 Treatment of trading stock of any business.
(1) In arriving at the amount of taxable income attributed to any business
conducted by any person in any year, due regard shall be had to the effect
on taxable income of movements during the year in the levels of trading
stock held or being undertaken by the person.
(2) For the purposes of sub-section (1):
(a) the value of any trading stock held or being undertaken by any
person at any annual reporting date shall be included in the person’s
gross income for that year; and
(b) where any amount is included in a person’s gross income in respect
of trading stock held or being undertaken at any annual reporting
date the corresponding amount shall be treated as a deductible cost
to that person at the commencement of the next succeeding year:
Provided that where the annual reporting date was the date of death of the
person, and the business continues to be conducted by his executors,
administrators or trustees, or direct beneficiaries, then the deduction will
be available to whichever of such persons continued the business.
(3) For the purpose of sub-section (2) the following specific rules shall apply:
(a) save as otherwise provided in this sub-section, all trading stock held
or being undertaken at the end of any year shall be valued at its cost
price; and

Section 19 Income Tax Act 1992

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(b) where the trading stock (not being land or financial securities) has
deteriorated in quality and thus in value such that it will not realise
its cost price, it may be valued at market value:
Provided that the use of market value shall only be permitted where and to
the extent that appropriate details are supplied with the tax return, and the
Taxation Officer is satisfied that both the use of that basis and the value
used are fair and reasonable.
(4) For the purpose of sub-section (1):
(a) where any trading stock held or being undertaken in relation to any
business is applied otherwise than for the purpose of the business,
then the market value of that trading stock so applied shall be
treated as gross income of the business;
(b) where any trading stock is held by any person on the cessation of
any business to which it relates, the market value of that trading
stock shall be treated as gross income of that person on the day of
that cessation, and the items shall thereupon cease to be trading
stock; and
(c) where any items which were not trading stock of the person at the
time of acquisition, and are subsequently introduced by him into his
business as trading stock, the market value of those items when so
introduced shall be deemed to be their cost price, and shall be a
deductible cost to that person at that time of introduction.
(5) Save where the Act otherwise provides:
(a) the term trading stock shall also include any revenue asset held; and
(b) save insofar as the Secretary may otherwise determine in the special
circumstances of any case, this section shall operate as if that
revenue asset were held by a business.
(6) Where he considers it expedient to do so, the Minister may issue
regulations governing any aspect of the basis for determining and
accounting for trading stock, or providing for exceptions to the
requirements of the legislation in this regard.
(7) This section shall not apply in determining the taxable income of any
business or part of a business of any person where and to the extent that
the gross income thereof is determined at the value of throughput in
accordance with section 20 or section 21 of this Act.
19 Special provisions relating to the treatment of gross income and
related expenditure.
(1) The special rules provided for in this section shall be followed:

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 Page 43

(a) in the determination of the amount, and where applicable, the
timing of the derivation of, gross income; and
(b) in the determination of the amount of, and where applicable, the
timing of the deduction for, related expenditure,
of any person to whom these rules have application.
(2) In the case of any person:
(a) that is a financial institution or an insurance company;
(b) that conducts any other business where the investment or lending of
customers’ or clients’ or members’ funds are undertaken to generate
an investment return;
(c) that is a company which is related to any person to whom this sub-
section otherwise apply; or
(d) that is a trustee for any person to whom this sub-section would
otherwise apply;
except to the extent to which the Secretary having regard to any special
circumstances of the case otherwise determines, all investments made as
part of its business of earning a return on its capital shall be treated as
revenue assets:
Provided that this provision shall not apply to that portion of any premises
held and occupied for business use, rather than for the earning of rent or
other direct return on the capital invested.
(3) All investments made by a provident, pension, superannuation or benefit
fund shall be treated as if —
(a) they were investments made by a business; and
(b) the fund were a financial institution and those investments were
investments of a financial institution:
Provided that this provision shall not apply to that portion of any premises
held and occupied for business use, rather than for the earning of rent or
other direct return on the capital invested.
(4) In determining the gross income and deductible costs of any person that is
a cooperative society, regard shall be had to transactions with members in
the same manner as would have been required had those members not
been members.
(5) In the case of any person that is a cooperative society, and in relation to
any year, that person may treat as a deductible cost the amount of any
bonus distributed by it to its members within 3 months following the end
of that year, insofar as:

Section 20 Income Tax Act 1992

Act 5 of 1992 Page 44


(a) the bonus was determined on a pro rata basis among all members
having regard to the value of transactions entered into between the
society and the members during the course of that year; and
(b) the amount of that bonus does not exceed that portion of the taxable
income made by the society for that year as the Taxation Officer is
satisfied is attributable to the member transaction and not
transactions otherwise than with members,
and for this purpose:
(c) taxable income attributable to loans or financial assistance given to
or by members shall be treated as transactions with non-members.
(6) In the case of any person who is a member of a cooperative society, any
bonus derived by him in any year shall be treated as gross income only
insofar as it is attributable to transactions pertaining to a business
conducted by that person or a related person.
(7) Where any non resident withholding income is derived by a non resident,
the provisions of section 38 shall apply in the determination of that
person’s taxable income.
(8) In any case where any gross income is derived by any person in any year
in his capacity as an executor, administrator or trustee of a deceased
estate, or as a trustee of any other trust, then:
(a) to the extent that such income vests in or is paid to a beneficiary
within 2 months of the end of that year, it shall be treated as a gross
income derived by the beneficiary in that year and not income of
the executor, administrator or trustee; and
(b) to the extent it is income which is not so derived, it shall be deemed
to be gross income of the executor or administrator or trustee (in his
capacity as such in relation to that trust or estate) for that year, and
not income of a beneficiary:
Provided that this sub-section shall not apply to —
(c) any person insofar as he acts as a bare trustee; or
(d) any amount of gross income that is deemed to be gross income of a
deceased person pursuant to section 23(8).
20 Special provisions for determining the taxable income content of
throughput.
(1) Subject to this section, where in relation to any year the taxable income of
a person includes or would include gross income from any business of the
type described in Schedule 4, then the gross income derived from that

Income Tax Act 1992 Section 21

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 Page 45

business (or relevant part thereof) shall be determined at the value of
throughput.
(2) Where sub-section (1) applies in relation to any person and any business
or part of a business, except as provided in section 15 or by regulation, the
provisions of this Act which otherwise would have applied in determining
the taxable income content of the gross income from that business or
relevant part, shall not apply.
(3) Where in relation to any year, a person first adopts or ceases to pursue the
determination of value of throughput in accordance with this section, then:
(a) in order to avoid prejudice to the person or to the Crown,
adjustments may be necessary to the person’s taxable income to
recognise the existence of debtors, creditors, trading stock and other
assets on hand at the time of entry to or exit from the regime; and
(b) for this purpose the Taxation Officer shall determine (in
consultation with the Secretary) what basis should be applied in any
particular case to address the situation.
21 Minister empowered to prescribe a simplified method of
determining taxable income in the interest of reducing compliance
costs.
(1) In any case where he considers it appropriate to do so, the Minster may
determine in relation to any year and:
(a) any person carrying on business in Tuvalu; or
(b) any class of persons carrying on business in Tuvalu,
that in order to obviate the need for the person or persons of that class to
maintain full accounting records or prepare annual accounts, an alternative
basis shall apply to determine the taxable income content of gross income
derived from any such business (including any part of a business).
(2) Any determination made pursuant to sub-section (1):
(a) in the case of a class of persons, shall be authorised by regulation
amending Schedule 4; and
(b) in relation to any individual person, shall be notified in writing to
that person,
in either case specifying the year or years for which the alternative basis
may be applied and setting out appropriate details of the alternative basis.
(3) The Minister shall only approve an alternative basis pursuant to sub-
section (1) if:

Section 21 Income Tax Act 1992

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(a) the business has independently controllable level of business
throughout which can act as a basis for reliably calculating its gross
income using a value of throughput approach;
(b) the business has a relatively low level of purchase or turnover (or
other appropriate criterion of throughput) in or in relation to
Tuvalu; and
(c) the alternative basis attempts so far as possible to leave the person
in no better or no worse position as regards the level of taxable
income that would otherwise have pertained.
(4) Any alternative basis approved and notified —
(a) shall only apply to:
(i) a person whose level of purchases or turnover (or other
appropriate criterion of throughput) for the business is for the
relevant year below a basic threshold level at which it would
be reasonable to expect that the person or persons should
have proper accounting records to properly reflect the
conduct of the business; or
(ii) any business conducted by the Crown, or by a statutory
corporation, where the Minister has so determined by
regulation;
(b) shall operate at the election person entitled to adopt the value of
throughput basis in terms of a determination made under this
section; and where an election is made under this section by a
person entitled to do so it shall take effect as follows:
(i) if made at or before the time when the annual return of
income of that person for the year is furnished, for the
succeeding year just commenced; or
(ii) in relation to any year, where the Taxation Officer is satisfied
that the adoption of the value of throughput approach does
not confer on the person any untoward tax advantage, for
such year as he may determine.
(5) Where in relation to any business and any year a person makes an election
in accordance with this section, the gross income derived in that year from
that business shall be determined at the value of throughput.
(6) Where sub-section (5) applies in relation to any person and any business
or part of a business, except as provided in section 15 or by regulation, the
provisions of this Act which otherwise would have applied in determining
the taxable income content of the gross income from that business or
relevant part, shall not apply.

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 Page 47

(7) Where in relation to any year, a person adopts or ceases to pursue or be
entitled to pursue the elective option, then in order to avoid prejudice to
the person or to the Crown, adjustments may be necessary to the persons’
taxable income to recognise the existence of debtors, creditors, trading
stock and other assets on hand at the time of entry to or exit from the
regime, and for this purpose:
(a) the Taxation Officer shall determine (in consultation with the
Secretary) what basis should be applied in any particular case or
class of cases; and
(b) where appropriate, the general approach which is required be taken
to effecting any such adjustments shall be published in regulations,
and they shall apply accordingly.
22 Adjustments required where persons or assets move in or out of
the tax base.
(1) Where in relation to any person and any year:
(a) any resident becomes non resident;
(b) any non resident becomes resident;
(c) any person previously liable to income tax on any gross income
henceforth ceases to be so liable in relation to income of that class;
(d) any person who derived exempt income henceforth becomes
taxable on the gross income which was previously exempt from
income tax;
(e) any asset or thing (other than trading stock) used by a person in a
business ceases to be so used and commences to be used otherwise
than for the purpose of the business; or
(f) any asset or thing (other than trading stock) previously acquired
otherwise than for the purpose of a business is introduced into a
business,
save insofar as the circumstance is specifically addressed by the Act, the
Taxation Officer, in consultation with that person and subject to the
provisions of this Act, shall determine the nature of the adjustments that
are appropriate in order that the tax consequences of the event are suitably
dealt with so as to ensure that, so far as possible, there is no resultant tax
preference or unfair tax consequence to the person as a result of the event.
(2) Where any person dies:
(a) the date of death shall be taken to be the annual reporting date or
that person for the year in which he died, and the provisions of this
Act shall apply accordingly for the period ending with that annual
reporting date;

Section 23 Income Tax Act 1992

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(b) assets passing —
(i) to the estate of the deceased; or
(ii) direct to the beneficiaries of the deceased,
shall be regarded as having been disposed of by the deceased
immediately prior to the date of death, at their market value;
(c) assets passing from the estate of a deceased person to beneficiaries
in that estate shall be treated as having been disposed of by the
estate, at their market value at the date of disposition;
(d) the provisions of —
(i) section 6(6) (with respect to adjustments for a shortened
annual reporting period);
(ii) section 18(2) (with respect to trading stock);
(iii) section 23(8) (with respect to gross income received after
death, and related expenditure); and
(iv) section 25(4) (with respect to tax losses),
shall have application; and
(e) the executors, administrators or trustees shall assume any
responsibilities which the deceased person had under this Act in
accordance with section 34.
23 Determining the year in which gross income and expenditure is to
be recognised.
(1) Notwithstanding any other provisions of this Act, and in particular:
(a) section 7, (which requires that gross income shall be recognised
when derived); and
(b) section 12, (which requires that expenditure shall be recognised
when incurred);
where and to the extent applicable, the provisions of this section shall
govern the timing of the recognition of gross income and expenditure in
the calculation of the taxable income of any person.
(2) Where:
(a) any emolument comprises any wages, salary, bonus allowance,
leave pay, sick pay, pay in lieu of leave, fees, commission, gratuity
or other lump sum payment (whether or not derived at the
conclusion of a period of employment) derived in respect of, or in
relation to, or arising out of the employment of any person;

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 Page 49

(b) the amount so derived relates to services rendered in an earlier year
or years (whether or not it also relates to services rendered in the
current year); then
(c) at the option of the person deriving that emolument , the amount so
derived may be treated as gross income of that person for the
relevant year or years (whether on a pro rata basis or otherwise)
with the intent that it be subjected to tax in the year or years to
which it most properly relates.
(3) In any such case under subsection 2 of this section, if the person
accordingly provides the Taxation Officer with a written election to that
effect not later than the final date prescribed for furnishing the annual
return of income for the year of derivation, then:
(a) to the extent that the emolument is attributed to an earlier year or
years, the amount shall constitute gross income in the earlier year or
years and not in the year it was derived; and
(b) notwithstanding any time limit specified in section 50 the Taxation
Officer shall on receipt of that written election raise an assessment
or amended assessment accordingly for the appropriate year or
years, and credit any income tax withheld or collected at source
against the liabilities so arising.
(4) Where and to the extent that any gross income derived (or to be derived)
is gross income of a business , and this is more properly attributable to a
year other than that in which it was (or will in fact be) derived, then the
income shall be deemed to be derived in that other year and not in the year
it was actually derived (or will be derived):
Provided that this sub-section shall not apply:
(a) to any gross income which is a dividend; or
(b) in any case where the Taxation Officer so determines in accordance
with this Act
(5) Where and to the extent that any deductible cost is —
(a) expenditure of a business, and this is more properly attributable to
gross income which was derived (or will in fact be derived) in a
later year, then those costs shall be deductible only in that later
year;
(b) expenditure which is only deductible by reason of section 15(2),
and the expenditure may reasonably be viewed as relating to a later
year, then those costs shall be deductible only in that later year:
Provided that this sub-section shall not apply where the Taxation Officer
so determines in accordance with this Act.

Section 24 Income Tax Act 1992

Act 5 of 1992 Page 50


(6) The provisions of sub-sections (4) and (5) shall not apply in any case
where, having regard to the circumstances of the person’s business or
investment activity, the aggregate net amount of the adjustments required
is not a material amount.
(7) For the purpose of giving effect to sub-sections (4) and (5) the Taxation
Officer may make such adjustments to the taxable income of any person
for any year as he, in his judgment objectively exercised, deems necessary
to ensure that the taxable income determined provides a correct reflex of
the true profit derived from the relevant business or investment activity in
that year, in accordance with the tenor of this section:
Provided that any such adjustments shall not operate to provide a
deduction for any expenditure or loss, or any deductions by way of
allowance, to the extent that such are not, or will not be, deductible costs
in relation to that or any other year.
(8) The preceding provisions of this section shall not apply in relation to any
person and any year where and to the extent that the person’s gross income
from a business (or part of a business) is determined with reference to the
value of throughput.
(9) Where in any year a person dies:
(a) any gross income derived by him in the period to the date of his
death shall be gross income for that period, even if received by or
on behalf of the executors and administrators, or trustees of his
estate after his death; and
(b) any expenditure incurred by the executors and administrators or the
trustees of his estate in collecting that gross income shall be deemed
to have been expenditure incurred by the deceased in the period
prior to his death.
(10) In relation to any year or years and to any particular case or class of cases,
the Minister may determine by regulation that the principles outlined in
this section shall (to the extent so determined) not be applicable in
determining the taxable income of any person or class of persons to whom
the section would otherwise apply.
24 Anti-tax avoidance provisions.
(1) Where the Taxation Office considers that:
(a) at any time in relation to any year a specified circumstance prevails
or prevailed;
(b) directly or indirectly as a result of this, any person has either —

Income Tax Act 1992 Section 24

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 Page 51

(i) derived less gross income or has incurred a higher level of
deductible costs than would or would in all likelihood
otherwise have occurred but for the arrangements,
occurrences or relationships which constitute the specified
circumstance; or
(ii) derived gross income or incurred deductible costs in a year
other than that in which they might reasonably have been
expected to be derived or incurred but for the arrangements,
occurrences or relationships which constitute the specified
circumstance; and
(c) in all the circumstances of the case, the situation identified may be
objectively viewed as being accountable significant extent to an
attempt by any person to achieve or engineer a tax advantage
(whether or not there are other advantages associated with the
circumstance) other than a tax advantage specifically contemplated
by the Act having regard to it scheme and purpose;
then the Taxation Officer shall:
(d) discuss his concerns with the person or his agent, with a view to
establishing the validity of his opinion;
(e) where he still considers the provisions of this section should apply,
discuss those concerns with the Secretary; and
(f) to the extent that the Secretary concurs with the views of the
Taxation Officer, and approves the pattern of adjustments
contemplated by the Taxation Officer to negate the perceived tax
advantage, proceed in accordance with sub-section (4).
(2) Where at any time in any income year a resident, either alone or with
related persons, directly or indirectly controls or has de facto over either:
(a) any company or other person who is non resident; or
(b) is a member (or a person related to a member) of a pension,
provident, superannuation or benefit fund (other than an approved
fund)where that member, together with related persons, can
reasonably be viewed as the person or persons will be the most
likely beneficiaries under the fund;
then, unless the Taxation Officer in his best judgement objectively
exercised otherwise determines:
(c) the gross income and deductible costs (in each case determined as if
the company or other persons were resident in Tuvalu) shall be
identified;
(d) insofar as that gross income and those deductible costs may
reasonably be attributed to the control or de facto control by the

Section 24 Income Tax Act 1992

Act 5 of 1992 Page 52


resident, shall be treated as gross income and that deductible costs
of that resident; and
(e) subject to the provisions of this Act, any overseas tax fairly
attributable to the gross income attributed pursuant to paragraph (d)
shall rank for a tax credit:
Provided that —
(f) this sub-section shall not apply in any case where and to the extent
that, in the Taxation Officer’s best judgement objectively exercised
the use of that company or other person (or any person who is
related to that company or other person) did not have as a
significant objective the gaining of a text advantage under this Act;
or
(g) in exercising his judgement as to:
(i) whether this sub-section does or does not apply to any person
at any time; and
(ii) where the sub-section is to apply, the manner and the extent
to which it shall be applied;
the Taxation Officer shall —
(iii) have regard to the tenor of this sub-section and the scheme
and purpose of the Act;
(iv) discuss his concerns with the Secretary; and
(v) to the extent that the Secretary concurs with the views of the
Taxation Officer, and approves the pattern of adjustments
contemplated by the Taxation Officer to negate the perceived
tax advantage, proceed in accordance with sub-section (4)
(3) Where:
(a) any amount or any benefit derived by any resident from the
executor, administrator or trustee of a deceased estate, or from the
trustee of any other trust; and
(b) the full amount or the value of that benefit is not gross income of
the resident;
then if, in the best judgement of the Taxation Officer objectively
exercised:
(c) that amount or benefit so received or derived by the resident may
reasonably be regarded as representing a distribution of amounts or
the value of benefits received or derived by the executor or
administrator or trustee at a time when the person was resident in
Tuvalu;

Income Tax Act 1992 Section 24

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 Page 53

(d) had all or any of the amounts or the value of the benefits derived by
the executor, administrator or trustee instead been derived by the
resident, such would have been gross income of the resident;
(e) that amount or value of the benefit had not constituted gross income
in Tuvalu in relation to the year it was derived by the executor,
administrator or trustee; and
(f) the delay in the executor, administrator or trustee in distributing the
amount or benefit to the person may be reasonably regarded as
having as a significant objective the gaining of a tax advantage
under this Act;
then the Taxation Officer shall:
(g) discuss his concern with the person or his agent, with a view to
establishing the validity of his opinion;
(h) where he still considers the provisions of this section should apply,
discuss those concerns with the Secretary; and
(i) to the extent that the Secretary concurs with the view of the
Taxation Officer, and approves the pattern of adjustments
contemplated by the Taxation Officer to negate the perceived tax
advantage, proceed in accordance with sub-section (4):
Provided that —
(j) if the person fails to make available to the Taxation Officer within
the time reasonably allowed, such information as the Taxation
Officer may reasonably require to exercise his judgment as
required, the Taxation Officer and the Secretary shall make their
decision on the facts then available to them; and
(k) subject to the provisions of this Act, any overseas tax fairly
attributable to any amount included in the gross income of any
person pursuant to this sub-section shall rank for a tax credit.
(4) Where the Secretary has given the approval contemplated by sub-sections
(1), (2) or (3), then notwithstanding any other provision of this Act the
Taxation Officer shall amend the liabilities to income tax imposed by this
Act on the person or persons affected by the specified circumstance or
other situation in which those sub-section pertain, in the manner approved
by the Secretary.
(5) Any adjustments which the Secretary approves and the Taxation Officer
makes under this section shall do no more than, in their best judgement
objectively exercised, is necessary to negate the perceived tax advantage.

Section 25 Income Tax Act 1992

Act 5 of 1992 Page 54


25 Tax losses.
(1) Where in relation to any person and any year the aggregate of deductible
costs exceeds the aggregate of the person’s gross income for the year then:
(a) for the purposes of this Act that excess shall be referred to as a ‘tax
loss’; and
(b) for the purpose of the succeeding provisions of this section, shall be
treated as a tax loss which arose in that year.
(2) Subject to this section, in any tax loss arising in any year shall be treated
as a deductible in the next succeeding year, but only so far as the person’s
taxable income (prior to any deduction under this section) for that next
succeeding year extends.
(3) Subject to this section, to the extent that any tax loss referred to in sub-
section (2) is not able to be treated as a deductible cost in the next
succeeding year, the residue of the tax loss shall be treated as the
deductible cost in the next subsequent year, and so on, in each case, so far
as the person’s taxable income (prior to any deduction under this section)
in those later years extends.
(4) For the purposes of this section:
(a) losses arising in any years shall be applied in the order in which
they arose;
(b) where the person is a company, a tax loss arising in any year may
be carried forward and dealt with in accordance with the provisions
of this section only where and to the extent that the Taxation
Officer is satisfied that there exits at the relevant times the requisite
continuity of effective interests (as set out in this sub-section);
(c) the requisite continuity of effective interests requires that the
aggregate of relevant shareholder interests in the company
(including relevant indirect shareholder interests through interposed
companies) may reasonably be regarded as being effectively held
primarily and principally by the same persons throughout the period
from the start of the year (or relevant part of the year) in which the
tax loss (or relevant part) arose through to the end of the year (or
relevant part of the year) in which that tax loss (or relevant part) is
to be claimed as a deductible cost; and
(d) where any person (being an individual) dies, and at the time of his
death, after taking into account taxable income derived in the period
up to his death, there remains any unused tax loss (whether it arose
in the year of death or in any year or years prior to his death)
(i) at the election of the executors, administrators, or trustees of
his estate, that tax loss shall be deemed to be expenditure
which was incurred by them in their capacity as such; and

Income Tax Act 1992 Section 26

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 Page 55

(ii) that tax loss shall thereupon cease to be available in relation
to any subsequent re-assessment of the deceased’s liability to
income tax.
(5) No deduction shall be claimable for any tax loss (or part of a tax loss)
which (pursuant to this section) is treated as expenditure incurred where
and to the extent that:
(a) in the case of any company, the requisite continuity of effective
interests (as described in sub-section (4)) has not been maintained;
or
(b) the Taxation Officer has applied the provisions of sections 14(2) or
24 to disallow the deduction of any such tax loss which is claimed
by the company as being a deductible cost in a later year of claim.
(6) For the purpose of this section:
(a) shareholder interests include all monetary interests and voting
interests in the capital of the company, as well as entitlements to
profits on a distribution; and
(b) should the need arise the provisions of this Act relating to the
determination of taxable income or loss shall be applied as if the
date when the requisite continuity of effective interests was
breached was the company’s annual reporting date.
26 A company may elect to have its taxable income taxed directly in
the hands of (and tax losses allocated directly to) its shareholders.
(1) Subject to this section, the shareholders of any company incorporated or
registered under the Companies Act 1991 and which is resident in Tuvalu
may elect that its gross income and deductible costs for any year be
treated as gross income and deductible costs of the shareholders (on a pro
rata basis) and that this Act shall apply accordingly.
(2) No election may be made under this section by the shareholders of any
company if:
(a) any of the shareholders are non qualifying shareholders (as defined
in section 2);
(b) there are at the time more than 7 persons who are shareholders:
Provided that for this purpose, the executors or administrators or trustees
of a deceased estate holding shares in a qualifying company in their
capacity as such shall collectively be viewed as a single shareholder; or
(c) the company is of any of the types referred to in the following
paragraphs of the definition of ‘company’ in section 2:
(i) paragraph (b), (being any cooperative society);

Section 26 Income Tax Act 1992

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(ii) paragraph (d), (being any benevolent, religious, educational,
charitable, cultural, amateur sporting or community service,
institution or organisation);
(iii) paragraph (e), (being any local authority);
(iv) paragraph (f), (being any trade union);
(v) paragraph (g), (being any pension provident, superannuation
or benefit fund); and
(vi) paragraph (h), (being any body of persons which the Minister
determines to be a company).
(3) No election may be made in relation to any company unless there is on
issue only one class of shares, all being paid up to the same extent, and
each share carries with it equal rights to share in any profits that may be
distributed.
(4) An election can only be made if:
(a) made by all the persons who are shareholders at the time, and each
of whom accept personal liability for the income tax liability on the
taxable income represented by their pro rata share of the gross
income and deductible costs at any time —
(i) they are a shareholder; and
(ii) the company is a qualifying company for that year; and
(b) the company provides the Taxation Officer with a written certificate
making an election to that effect, and for each shareholder:
(i) indicating the extent of their pro rata percentage interest in
any profits of that company that may be distributed; and
(ii) affixing his signature (or that of his agent) to confirm
acceptance (or the person they represent’s acceptance of) a
personal liability for the income tax liability on the taxable
income represented by their pro rata share of the gross
income and deductible costs at any time during the period
they are a shareholder and the company remains a qualifying
company.
(5) Any valid certificate given to the Taxation Officer:
(a) within 3 months of incorporation of a company shall cause the
election to take effect in relation to that company from the date of
incorporation;
(b) within 3 months of the start of any year, shall cause the election to
first take effect in relation to that company for that year; and
(c) at any other time shall cause the election to take effect in relation to
that company from the commencement of the next succeeding year.

Income Tax Act 1992 Section 26

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 Page 57

(6) Where any election contemplated by this section is in effect, the company
shall be referred to as a qualifying company.
(7) No election contemplated by this section shall be of effect in any year
where the company is at any time in that year not resident in Tuvalu.
(8) Within 2 months of the end of each year (or such further time as the
Minister in any particular case may approve), a qualifying company shall
advise its shareholders of their attributed pro rata share of each item of
gross income and each item of deductible cost comprising the taxable
income (or tax loss) of the company for the year just completed, and shall
include details of that allocation with its own annual return of income.
(9) In respect of any year during which an election is in force and effect for
that year:
(a) there shall be no obligation on the company to effect any
provisional tax payments or make any payment on account of its
personal income tax liability; and
(b) any overseas tax credits to which the company is entitled pursuant
to section 27 shall be allocated to shareholders on a pro rata basis.
(10) Where, in accordance with sub-section (8), an extended period of time for
advising shareholders has been approved in relation to any year, such
approval shall correspondingly apply to the time within which the
company and its shareholders must file their annual return of income, but
shall not affect the final date by when those persons must pay any residual
income tax liability in relation to that year.
(11) Any amount of gross income and deductible cost comprising the taxable
income or tax loss of the company which is attributed to any person in
accordance with this section shall be included respectively in the gross
income and the deductible costs of that person for the same year as that in
which the company otherwise would have been required to recognise
them.
(12) Where a company which becomes a qualifying company already has a tax
loss, that tax loss may not be accessed by its shareholders, but subject to
the provisions of section 25, shall remain available for use by the
company in any subsequent year in which it is not a qualifying company.
(13) Where there is any event triggering a change in the pattern of shareholder
profit participation in a qualifying company:
(a) a new certificate (listing the revised information and carrying the
signatures which accept personal liability for the company’s income
tax liability) shall be lodged with the Taxation Officer; and

Section 26 Income Tax Act 1992

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(b) that lodgement shall occur within 3 months of the date of the event,
otherwise the existing election will lapse with effect from the first
day of the year in which that event occurred.
(14) Where any disqualifying event occurs, any existing election lapses, and
will be treated as having not been in effect in the year in which that event
occurs:
Provided that in any case where the company is able to satisfy the
Minister that there would be no significant prejudice to the Crown by
allowing the company to retain qualifying company status for the
remainder of the year in which that disqualifying event occurs, the
Minister may authorise that the election be treated as being in effect until
the end of that year (or the date of any other disqualifying event,
whichever first occurs).
(15) Where a company and its shareholders wish to revoke any election under
this section, they shall give written notice to the Taxation Officer to that
effect (that notice being signed by all the shareholders or, where
appropriate, their guardian or agent) and that revocation shall take effect
from the commencement of the next succeeding year.
(16) Where any election made under this section lapses or is revoked:
(a) the undertakings as to personal liability given by shareholders or
their agent in respect of the income tax liability on the taxable
income represented by their pro rata share of gross income and
deductible costs during the period the company was a qualifying
company shall remain in force and of effect;
(b) the provisions of this Act shall continue to apply from the relevant
date as if the company had never had qualifying company status;
and
(c) the Taxation Officer shall make such adjustments to the taxable
income or income tax liability of any person, or require such
payments to the Crown, as he, in his best judgement objectively
exercised, considers appropriate to ensure that the company and its
shareholders do not enjoy any undue preference or suffer any unfair
disadvantage as a result of the change in status.
(17) Where any company was not previously a qualifying company but
becomes a qualifying company, should the need arise, the Taxation
Officer shall make any adjustments to the taxable income or income tax
liability of any person, or require such payments to the Crown, as he, in
his best judgement objectively exercised, considers appropriate to ensure
that the company and its shareholders do not enjoy any undue preference
or suffer any unfair disadvantage as a result of the change in status.

Income Tax Act 1992 Section 27

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 Page 59

(18) In any case where there is any dispute as to the portion of any gross
income deductible costs and tax liability attributed to any shareholder in
accordance with this section, the decision of the Minister shall be final,
and not subject to objection and appeal procedures.
PART 4 – CREDITS FOR OVERSEAS TAX
27 Credits for overseas tax
(1) Subject to this section, where:
(a) any resident is liable to pay income tax on his taxable income for
any year; and
(b) that resident has paid by deduction or otherwise any amount of
overseas tax for such year on any amounts included in that taxable
income,
then he shall be entitled to a credit against the income tax attributable to
that taxable income, of that portion of the overseas tax paid as is
determined under sub-section (2).
(2) The amount of any tax credit available under sub-section (1) in respect of
any category of gross income arising overseas in any year shall be limited
to the lesser of:
(a) the appropriate portion of income tax (as defined in section 2); and
(b) the appropriate portion of overseas tax (as defined in section 2).
(3) No credit shall be available in respect of any amount of overseas tax
unless satisfactory evidence is furnished to the Taxation Officer to
establish or evidence the fact that:
(a) the overseas tax was in fact paid (whether through withholding or
otherwise), and is fairly attributable to the overseas income
included in gross income for the year for which the claim is being
made; and
(b) the person has and had no right of recovery from the relevant
overseas authorities of the amount of overseas tax being taken into
account in the calculation of the appropriate portion of overseas tax.
(4) Notwithstanding the preceding provisions of this section:
(a) where any person in any year derives a dividend from a source
outside Tuvalu, that person:
(i) shall not be entitled to any overseas tax credit in respect of
any portion of that dividend; and

Section 28 Income Tax Act 1992

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(ii) shall instead be entitled to treat that dividend as exempt to
the extent provided in paragraph 3 of Part 3 of Schedule 1:
Provided that, by an election (made in writing within 2 years
following the end of the year in which the dividend was derived)
that person may choose for the exemption provided in paragraph 4
of Part 3 of Schedule 1 to apply instead of that provided by
paragraph 3 to Part 3 of Schedule 1;
(b) where:
(i) any income is excluded from gross income by reason of
being exempt income; and
(ii) that income has any overseas tax attributable to it;
in applying the provisions of this section that overseas tax so
attributable shall be disregarded;
(c) in any case where in relation to any person and any year:
(i) that person considers in the circumstances of the case, the
application of this section gives rise to a significant inequity;
and
(ii) this is demonstrated to the satisfaction of the Secretary;
the Secretary (with the concurrence of the Minister) may approve
such additional relief as he considers to be warranted; and
(d) the provisions of this section, and the definitions of ‘appropriate
portion of income tax’ and ‘appropriate portion of overseas tax’ in
section 2, shall be read subject to the requirements of any tax treaty
entered into pursuant to section 84 and in force for the relevant
year.
PART 5 – STATUS OF PERSONS IN RELATION TO
PARTICULAR TRANSACTIONS OR CIRCUMSTANCES
28 Status of persons representing a company
(1) Where any obligation is imposed upon any company by this Act, save as
provided in section 29, the directors of that company at the relevant time
shall be jointly and severally responsible for ensuring that the obligation is
performed.
(2) Where a company is in default of any obligation under the Act, save as
provided in section 29, the directors of the company at the relevant time
shall be deemed to be the persons committing the offence or allowing the
omission which gave rise to default.

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 Page 61

(3) Save as provided in sub-section (4), in the absence of fraud or wilful
neglect or default, nothing in this section shall be construed as imposing
any personal liability on the directors to meet the amount of any income
tax liability in respect of the company’s taxable income for any year.
(4) Where any company or its, shareholders take or fail to take any action,
and in the opinion of the Taxation Officer (and with the concurrence of
the Secretary) a purpose of that action or failure was to leave the company
unable to meet any income tax liability, the directors at the time of that
action or failure shall be jointly and severally liable for the amounts
unpaid:
Provided that:
(a) where the action or failure was an action or failure by the
shareholders, the liability shall befall the shareholders pro rata to
their interests in the company, and not the directors; and
(b) where and to the extent that the Minister, having regard to the
circumstances and the level of culpability of any one or more
directors, considers that it is appropriate that such director or
directors should not be personally liable, this sub-section shall not
apply.
(5) The provisions of sub-section (3) and (4) apply equally to any income tax
which the company was required to account for under section 37.
29 Effect of liquidation or receivership on the tax status of a company
(1) Where any company is:
(a) placed in liquidation or receivership or is otherwise placed under
statutory or judicial management or control; or
(b) the requisite steps have been initiated to wind up or terminate the
existence of the company;
then subject to this section, so long as the company remains in existence
and is subject o such liquidation, receivership, management or control, or
is being wound up or its existence is in the process of being terminated, it
shall continue to remain subject to this Act as if no such event had
occurred.
(2) Any person who is appointed as liquidator, receiver, or statutory or
judicial manager, or who has responsibility for the winding up or
termination of the company, shall be liable in that capacity for all the
income tax obligations that would otherwise have befallen the company
during the period of his appointment, and shall be entitled to all the rights
which the company otherwise would have had during that period.

Section 30 Income Tax Act 1992

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30 Status of partners in a partnership or parties to a joint venture
(1) Where any persons:
(a) are in partnership; or
(b) are parties to a joint venture; or
(c) hold investments jointly;
then —
(d) the partnership, joint venture or joint investment shall not itself be
an entity subject to income tax;
(e) the taxable income (or tax loss) of the partnership, joint venture or
joint asset ownership shall be determined in accordance with the
provisions of this Act as if it was an entity in its own right;
(f) subject to this Act those persons shall be liable to income tax on
their respective shares of any taxable income arising from that
partnership, joint venture or joint asset ownership on the basis that,
having regard to the terms of the arrangement between the parties,
it comprises gross income derived by them and expenditure
incurred by or available to them at the time or times such gross
income was derived or expenditure was incurred or became
available; and
(g) subject to the provisions of this Act, those persons shall avail
themselves of their respective shares of any tax loss (as
contemplated by section 25(1)) arising from that partnership, joint
venture or joint asset ownership on the basis that, having regard to
the terms of the arrangements between the parties, it comprises
gross income derived by them and expenditure incurred by or
available to them at the time or times such gross income was
derived or expenditure was incurred or became available.
(2) Where any persons referred to in sub-section (1) are required pursuant to
section 37 to withhold or collect tax at source in relation to payments
made by or on behalf of the partnership, joint venture, or joint asset
ownership those persons shall be jointly and severally responsible for so
doing.
31 Persons making certain payments to non residents deemed to be an
agent of the non resident
(1) Where any person makes payment to any non resident of any amount
referred to in Schedule 5 that person shall be deemed to be the agent of
that non resident in relation to that payment.

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 Page 63

(2) This Act shall apply to that person in his capacity as agent of that non
resident.
32 Liability of persons representing non-residents
(1) To the extent that any income tax liability of a non resident has not been
assessed to, or has been assessed and not recovered from that non resident,
that income tax liability shall be recoverable from any person who is the
agent of that non resident, or from any person who in relation to that non
resident is a related person.
(2) This section shall apply equally to any income tax which that non resident
or his agent is required to account for pursuant to section 37.
(3) The Minister may determine that this section shall not apply to any person
to the extent that he considers it appropriate having regard to all the
circumstances of the case.
33 Status of persons representing an incapacitated person
Where any person or persons assume responsibility for or have the control of the
property of an incapacitated person, that person or persons assuming that
responsibility shall be liable in their representative capacity to income tax in a
like manner and to a like amount as would have applied had the incapacitated
person not been incapacitated.
34 Status of executor and administrator, or trustee, in relation to the
estate of a deceased person
(1) The executor, administrator or trustee of a deceased estate shall be
responsible in his representative capacity for:
(a) any income tax liability of the deceased for any prior year and for
the period up to his death; or
(b) any income tax liability attaching to the estate in respect of gross
income derived by the estate.
(2) This section shall apply equally to any income tax which that deceased
person or that estate was or is required to account for pursuant to section
37 of this Act.
35 Minister’s power to appoint agent
In any case where he considers it necessary, and appropriate, with the approval
of Cabinet, the Minister may by notice declare any person to be the agent of any

Section 36 Income Tax Act 1992

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other person for the purposes of this Act, and the provisions of the Act shall
apply as if that person were the agent of that other person.
36 Right of persons to recover income tax from persons they represent
(1) Every person who is required under this Act to account for any income tax
liability of another person may:
(a) recover the amount of that liability from the person who derived the
gross income or taxable income to which the income tax liability
attaches; or
(b) retain out of any money coming into his hands on behalf of that
other person so much as may be sufficient to meet such liability,
and shall be indemnified against and person whatsoever for all payments
made by him on account of the liability of the other person.
(2) Where:
(a) any person has, pursuant to this Act, directly or indirectly legally
withheld or retained any money from any amounts owing to another
person on account of that person’s liability to income tax; and
(b) the Minister has not in the special circumstances of the case
otherwise determined by notice in writing;
that other person shall be deemed to have paid the amount of income tax
so retained.
PART 6 – OBLIGATION TO WITHHOLD TAX FROM
PAYMENTS MADE TO OTHER PERSONS, AND LIABILITY
TO TAX ON NON RESIDENT WITHHOLDING INCOME
37 Obligation on persons to withhold or collect income tax at source
(1) Where in relation to any employment a person derives any amount or is
provided with any benefit which constitutes an emolument, the employer
shall at that time withhold or otherwise collect income tax attributed
thereto at the rate and on the basis specified in Schedule 5.
(2) Every person who pays or credits to any non resident any amount of non
resident withholding income shall at that time withhold or otherwise
collect income tax (being non resident withholding tax) at the rate
prescribed in Schedule 5.

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(3) Where any person pays to any non resident any amount (not being an
amount by way of emolument or non resident withholding income), and
that amount is of a type referred to in Schedule 5, that person shall
withhold from that amount or shall otherwise collect any amount of
income tax required to be withheld or collected at source (being an
amount calculated at the rate prescribed in Schedule 5 as applied to the
amount of the payment or the proportion of the payment, a required by
that schedule).
(4) Every person who pays any other person any amount (not being an
amount being previously referred to in this section) in respect of which a
withholding rate is prescribed in Schedule 5, shall at that time withhold or
otherwise collect an amount of income tax (being an amount calculated at
the rate prescribed in Schedule 5 applied to the amount of the payment of
the proportion of the payment, as required by that schedule).
(5) The Minister, in his discretion having regard to all relevant circumstances
(including the terms of any tax treaty concluded in terms of section 84,
and currently in force), may authorise any person in writing —
(a) not to withhold income tax; or
(b) to withhold an amount of tax which is less than that prescribed by
the Act;
where he is satisfied that if that action were not taken significantly more
tax would be collected than any related liability which may befall the
person who will, be the recipient of the amount subject to withholding or
collection, and the provisions of this Act shall be applied accordingly.
(6) Any authority issued in terms of sub-section (5) shall set out the extent
and the period for which the relief provisions are to apply.
(7) where, in accordance wit’ this section, any person is required to withhold
or otherwise collect an amount of income tax from or in relation to any
gross income:
(a) to that extent, the person shall be an agent of the Crown; and
(b) every such amount that is required to be withheld or collected —
(i) shall be accounted to the Crown not later than the final date
for payment, being the last day of the month immediately
following that in which withholding or collection was
required in terms of this section;
(ii) shall be regarded as a first charge on the gross income or
entitlement in question and shall be dealt with prior to any
other deduction or charge which the person may be required
to observe, whether by virtue of any court order or rule of
law;

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(iii) shall be deemed to be held in trust for the Crown and shall
not be subject to attachment in respect of any debt or liability
of the said person; and
(iv) in the event of any liquidation, assignment, or bankruptcy
shall form no part of the assets available for distribution to
other persons, but shall be payable in full to the Crown
before any other distribution of property is made.
(8) Where any income tax is withheld or otherwise collected in terms of this
section, the person on whose behalf the income tax has been gathered
shall be entitled to obtain from the withholder or collector (or their agent
or successors in office) documentary evidence of that tax having been
gathered, and so far as practical, such evidence shall be provided within 7
days of a request being received by the withholder or collector.
(9) Save where this Act otherwise provides, any income tax withheld or
collected in terms of this section shall be credited against the income tax
liability of the person who derived the non resident withholding income,
emolument or other gross income referred to in this section.
(10) Where any person fails to account to the Crown within the time prescribed
in this section for any amount which was or should have been collected at
source:
(a) that person shall be and remains personally liable as agent to pay to
the Crown the amount required to be accounted for;
(b) subject to this Act, that person shall be liable to pay interest in
accordance with section 58 and (where appropriate) to pay late
payment penalties in accordance with section 61 in respect of the
amounts of income tax not accounted for by final payment date, in
relation to the period that the amount owing remains unpaid after
that final payment date; and
(c) unless the Minister in any particular case otherwise determines in
accordance with the provisions of this Act, the failure to withhold
or collect and account shall constitute a Category 1 offence.
(11) Where:
(a) any person has failed to withhold or collect income tax at source;
and
(b) that person or any other agent is required pursuant to sub-sections
(10) or (12) to personally account for that income tax;
then —
(c) insofar as that income tax has not otherwise been accounted for to
the Crown, that person or other agent may recover all or part of that

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amount (but not any interest or penalty imposed pursuant to section
58 or section 61) from any other person who:
(i) is the person (in this paragraph referred to as the taxpayer)
who derived the relevant gross income to which the amount
of income tax relates;
(ii) has in his possession any funds which belong to that
taxpayer;
(iii) is an agent (including any person who under this Act is
deemed to be an agent) of the taxpayer, so far as that agent
has or will have in his possession or control any funds which
belong t the taxpayer:
Provided that where the funds are not yet in the possession or
control of the agent, the agent shall not be obliged to act on any
recovery claim until those funds are in his possession or control:
Provided that in no case may the amount so recovered exceed in the
aggregate the amount of income tax which was required to be
withheld or accounted for.
(12) Where any person, including any agent for any person, receives or derives
any amount of gross income from or in relation to which income tax is
required to be withheld or collected either:
(a) no amount of income tax was so withheld or collected; or
(b) insufficient income tax was withheld or collected;
that person shall be personally liable to make payment of the income tax
shortfall, and where the Minister so directs, shall be jointly and severally
liable with any agent who had the responsibility for withholding and
collecting the correct amount of income tax for any applicable interest and
late payment penalties.
(13) Within one month of the end of each year, every person who was in
relation to that year required to withhold or collect and account for income
tax in terms of this section in relation to any payments or benefits made
shall provide the recipient of the payment (or his agent) with a certificate
(in the form prescribed pursuant to section 81) setting out in relation to
that year:
(a) the aggregate of gross amount of payments made and value of
benefits provided;
(b) the aggregate of any deductions made and accounted for to
approved funds; and
(c) the aggregate of any income tax withheld or collected on behalf of
the recipient.

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(14) Where any person fails to provide the information required by sub-section
13 within the time required, that failure shall constitute a Category 3
offence.
38 Income tax treatment of non resident withholding income
(1) Where for any year any non resident derives gross income that is non
resident withholding income (as defined in section 2 of this Act), then
notwithstanding withholding income any other provision in this Act, the
non resident’s liability to income tax in respect of that gross income shall
be determined in accordance with this section.
(2) Where the non resident withholding income is a dividend, the liability to
income tax shall be determined solely with reference to the amount of
income tax required to be withheld or collected at source pursuant to
section 37, and neither the amount of the dividend nor related expenditure
shall be taken into account in the determination of the non resident’s
taxable income.
(3) Where:
(a) the non resident withholding income derived by any person at any
time is service fees;
(b) the service fees (or relevant part thereof) relate to services rendered
outside Tuvalu; and
(c) those services were not rendered by the non resident in the context
of a business conducted by him or a related person in Tuvalu,
the liability to income tax with respect to those service fees shall be
determined solely with reference to the amount of income tax required to
be withheld or collected at source pursuant to section 37, and neither the
amount of the service fees nor related expenditure shall be taken into
account in the determination of the non resident’s taxable income.
(4) Where:
(a) the non resident’s withholding income is an amount paid by way of
specified alimony payment; and
(b) the amount of income tax withheld or collected at source has been
accounted for in the manner required by section 37, the liability of
the non resident to income tax on that amount shall be determined
solely with reference to the amount of income tax required to be
withheld or collected at source, and neither that amount nor related
expenditure shall be taken into account in the determination of the
non resident’s taxable income.
(5) Where the non resident withholding income is gross income other than:

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(a) a dividend;
(b) a service fee to which sub-section (3) applies; or
(c) specified alimony payment to which sub-section (4) applies,
then the tax treatment of that gross income shall be determined in
accordance with the succeeding provisions of this section.
(6) Where in relation to any person and any year subsection (5) applies, there
shall be calculated in relation to that person and that year a notional
taxable income as if the provisions of this Act (other that this sub-section
and succeeding sub-sections) applied, to permit the determinations
specified in sub-section (7) to be made.
(7) The determinations required by sub-section (6) are:
(a) the amount which would be the notional income tax liability of the
non resident if his taxable income for the year were an amount
equal to the notional taxable income for that year calculated in
accordance with the provisions of sub-section (6);
(b) the proportion of the person’s notional income tax liability as is, on
a pro rata basis, attributable to the aggregate net amount of each
category on non resident withholding income (after taking into
account related deductible cost) included in that amount of notional
taxable income; and
(c) the amount of income tax (being non resident withholding tax)
which was required to be withheld or collected at source with
respect of each such category of non resident withholding income.
(8) The amount of income tax which shall be payable by any person in
respect of each category of non resident withholding income derived by
him shall be the greater of:
(a) the amount of attributable notional income tax (determined in
accordance with sub-section (7)); and
(b) the amount of the non resident withholding tax identified (in
accordance with sub-section(7)) with respect to that category.
(9) Where, with respect to any category of non resident withholding income
(not being gross income to which sub-sections (2), (3) or (4) apply) the
greater liability is the amount of non resident withholding tax, then:
(a) the non resident’s liability to income tax on that category of non
resident withholding income shall be determined solely with
reference to the amount of income tax required to be withheld or
collected at source pursuant to section 35; and
(b) neither the amount of gross income nor the amount of related
expenditure with respect to that category of non resident

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withholding income shall be taken into account in the determination
of the non resident’s taxable income for the year.
(10) Where, with respect to any category of non resident withholding income
(not being gross income to which sub-sections (2), (3) or (4) apply) the
greater liability is the amount of the notional income tax liability, then:
(a) the non resident withholding income shall be included in the gross
income taken into account in determining the non resident’s taxable
income for the year;
(b) the non resident shall be entitled to take into account any deductible
cost relating to that category of non resident withholding income;
(c) the taxable income of the non resident shall then be determined;
(d) the non resident’s liability to income tax on their taxable income
shall be determined in accordance with the provisions of this Act;
and
(e) credit shall be given against that liability for the amount of income
tax withheld or collected at source pursuant to section 37 in respect
of any item of gross income included in that taxable income.
PART 7 – ADMINISTRATION OF THE ACT AND
COLLECTION OF INCOME TAX
DIVISION 1 – RECORD KEEPING
39 Requirements to keep appropriate records
(1) For the purposes of this section, the term person shall include any
partnership, joint venture or activity involving the joint ownership of
assets and the persons who are parties to any such partnership, joint
venture or joint ownership.
(2) Every person who, whether separately or jointly, carries on in Tuvalu any
business or owns in Tuvalu any income earning capital assets shall ensure
that there is kept, either in English or the language of Tuvalu, such records
of the transactions and activities of the business or of matters pertaining to
asset ownership as are necessary to allow the proper determination of —
(a) the amount of any income tax liabilities thus arising (whether on
their own account or in any other capacity); and
(b) any obligations befalling the person under this Act:
Provided that in the case of persons conducting a business in Tuvalu,
unless the Secretary considers it appropriate for all or any of those records

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to be kept outside Tuvalu, and authorises accordingly in writing those
records shall be kept within Tuvalu.
(3) Without in any way limiting the requirements of this section, the records
required to be kept by any person to whom sub-section (2) applies need to
be sufficient:
(a) to substantiate the accurate determination of the gross income
derived by that person in any year and the deductible cost incurred
in that year;
(b) to disclose details of —
(i) the full income and address of each person who is or was at
any time an employee of the person:
Provided that in respect of a former employee, a record of such
employee’s address at the time of his ceasing to be an
employee shall be sufficient compliance with this
requirement;
(ii) the amount or value of each periodic payment or provision of
emoluments to each such employee;
(iii) the amount of each periodic amount collected from each
employee by way of contribution to an approved fund and the
amount of the corresponding contribution to that fund by the
person as employer; and
(iv) the amount of income tax withheld at source from each
periodic amount of emolument due to each employee,
and for this purpose the records shall also record separately any
amount paid or any benefit provided to any person which, but for
being exempt income, would have been an emolument; and
(c) to evidence the amount and circumstances of any payments to non
residents (whether or not those amounts comprise non resident
withholding income) and any related liability to account for income
tax pursuant to section 37.
(4) Unless the Secretary or Minister otherwise requires or allows pursuant to
approvals given under sub-section (5), all records which are required to be
maintained in terms of this section shall be retained for a period of not less
than 5 years from the end of the year to which the transactions relate.
(5) In:
(a) any particular case or class of cases; or
(b) relation to particular types of records
a differing pattern of record retention may be approved either by —

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(c) the Secretary, by specific approval given in writing to the person or
persons affected; or
(d) the Minister, by regulation.
(6) Where, without reasonable cause, any person to whom this section applies
fails to keep records in the manner required by this section for the period
required, that failure shall constitute:
(a) a Category 2 offence where, in the opinion of the Minister, the
failure involves wilful neglect or wilful default; and
(b) a Category 3 offence in any other case.
40 Requirement of a person to provide officials with information and
assistance on request
(1) Where either the Minister, the Secretary or the Taxation Officer so request
of any person, that person shall within the time allowed —
(a) provide that officer at any reasonable time suitable access to all or
any parts of any premises owned or used by the person, where the
officer making the request reasonably requires such access for the
due performance of his responsibilities under this Act;
(b) make available to the officer such books, documents, records
information or other thing which the officer making the request
reasonably requires for the due performance of his responsibilities
under this Act; and
(c) prepare or collect or complete such information or records or
returns as the officer making the request reasonably requires for the
due performance of his responsibilities under this Act:
Provided that in no case shall the person be required to provide or collect
any document or thing insofar as it records advice given to the person by a
professional adviser in respect of any matter under this Act, where and to
the extent —
(d) that advice was given after the occurrence of the transaction or
event or circumstance to which it relates; and
(e) it does no more than —
(i) advise with respect to the tax and accounting implications
thereof; or
(ii) give advice in contemplation of, or for the purpose of,
objection and appeal procedures under this Act.
(2) Where, without reasonable cause, any person to whom this section applies
fails fully and properly and honestly to respond in the manner required
and within the time period reasonably allowed in relation to any valid

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request made by an officer pursuant to this section, that failure shall
constitute:
(a) a Category 2 offence where, in the opinion of the Minister, the
failure involves wilful neglect or wilful default; and
(b) a Category 3 offence in any other case.
DIVISION 2 – RETURNS
41 Requirement to furnish a return of income
(1) This section shall apply to any person for any year where that person is:
(a) in relation to that year, an individual who either —
(i) derives taxable income in excess of —
(aa) the specified level of taxable income (as defined in
section 2); or
(bb) such greater amount as the Minister may by regulation
determine in relation to that year; or
(ii) is responsible under the Act (otherwise than under section
37) for accounting for the income tax liability of another
person, and that liability for the year is in excess of —
(aa) the specified level of taxable income (as defined in
section 2); or
(bb) such greater amount as the Minister may by regulation
determine in relation to that year;
(b) a company which has in that year derived any gross income (not
being non resident withholding income the income tax liability in
relation to which is determined exclusively by the amount of
income tax withheld at source);
(c) in respect of any year (or part of a year) by notice writing required
by the Minister, the Secretary or the Taxation Officer to furnish a
return of income; or
(d) of a class of persons whom the Minister has by regulation
determined that this section should apply;
but:
(e) this section shall not apply with respect to any non resident where
the only gross income derived by that non resident from Tuvalu is
gross income by way of one or more of dividends, service fees, and
specified alimony payments, where the liability to income tax in
respect thereof has been fully withheld or collected and accounted
for at source.

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(2) Every person to whom this section applies shall prepare and furnish a full
and proper return of income for that year (or part of a year) using the
forms prescribed under authority of section 81.
(3) For the purpose of sub-section (2):
(a) where the person’s gross income includes items other than:
(i) any emolument; and
(ii) interest (in the case of an individual),
the person shall append to the return —
(iii) any appropriate annual accounts or other relevant financial
information sufficient to show the gross income and any
related deductible costs for the period and (in the case of a
business) the related financial position at annual reporting
date; and
(iv) such other information as the Taxation Officer may
reasonably require for the proper performance of his official
duties with respect to that return and the determination of any
related income tax liabilities;
(b) where any return of income has been requested in writing by the
Minister, the Secretary or the Taxation Officer, that officer may
request the return to include any such information as he may
reasonably, require for the proper performance of his official duties
with respect to that return and the determination of any related
income tax liabilities;
(c) a full and proper return of income means a return of income:
(i) which is furnished to the Taxation Officer within the time
(or, where applicable, the extended time) allowed under his
Act;
(ii) which is complete in all material respects, including the
information and items requested in the return form or
accompanying instructions or which are otherwise required
to be furnished in terms of the Act; and
(iii) that information and those items are in an acceptable form
and reflect sufficient detail to meet the obligations and
expectations of that person in terms of this Act.
(4) Where the Secretary so requires, the provisions of sub-section (2) shall
also apply to any person who is responsible under this Act (otherwise than
under Section 37) for accounting for the income tax liability of any other
person to whom sub-section (2) applies or would otherwise apply.
(5) Notwithstanding sub-section (2), either:
(a) on his own initiative in relation to any person; or

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(b) on request by any person,
the Taxation Officer, if he considers it appropriate, may allow that person
to prepare any return of income otherwise than by using all or any of the
forms prescribed under authority of section 81.
(6) Any return of income required to be furnished in terms of this section
shall be furnished:
(a) Where the person had not been accorded an extension of time
pursuant to section 43, within 2 months of the end of the year;
(b) where the person has been accorded an extension of time pursuant
to section 43, within the time thereby allowed; and
(c) where the person is a person who received a written notice to
furnish a return within such time as is specified in that notice.
(7) Notwithstanding anything in this section, where in accordance with
section 6, in relation to any business conducted by any person, the
Secretary has approved an annual reporting date which falls between
January and 30 June in any year, that person’s annual return of income
shall be furnished within two months after the end of the reporting period
which ends with that annual reporting date (or within such further time as
the Secretary has allowed pursuant to section 43).
(8) Any failure to furnish a return within the period required by this section
shall constitute:
(a) a Category 2 offence where, in the opinion of the Minister the
failure involves wilful neglect or wilful default; and
(b) a Category 3 offence in any other case.
(9) Where any return has been furnished which is found to be wilfully or
negligently deficient or incorrect, or contains false statements, with an
intent to evade income tax, that shall constitute a Category 2 offence.
42 Persons required to lodge returns of information
(1) Where any person:
(a) who is not an employer on the coming into force of this Act,
commences to be an employer, he shall notify the Taxation Officer
in writing of that fact within a period of 10 working days from the
date he commences to be a employer; or
(b) ceases to be an employer after the coming into force of this Act, he
shall:
(i) notify the Taxation Officer in writing of that fact within 10
working days of the date of cessation; and

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(ii) within 30 days of the end of the month in which cessation
occurred, furnish a return setting out the information as
contemplated by sub-section (2)(b).
(2) The following persons shall be required to furnish within the time frames
indicated, a return in the form prescribed in terms of section 81 (or where
appropriate, section 41(5)) setting out fully the details required in that
return:
(a) every employer, within 30 days of the end of each month, a return
setting out the amount of income tax withheld or collected at source
pursuant to section 37;
(b) every employer, within 30 days of the end of each year, a return
setting out for each individual person who was an employee in
relation to that employer in that year, particulars as to —
(i) total emoluments for the year;
(ii) contributions to approved funds withheld from emoluments
for the year; and
(iii) income tax withheld or collected at source in relation to those
emoluments for the year,
being the same particulars as individually advised to each
employee, and reconciling:
(iv) the aggregate of the income tax so withheld or collected in
relation to emoluments derived by the employees from that
employer in that year; with
(v) the aggregate of the monthly payments made to the Crown on
their behalf;
(c) every person who withholds or collects income tax (being non
resident withholding tax) from any amount of non resident
withholding income, within 30 days of the end of each month in
which there was an obligation to withhold or collect such tax, a
return setting out each such amount and relevant particulars of that
income tax withheld or collected at source pursuant to section 37;
(d) every person who withholds or collects income tax (other than from
any emolument or non resident withholding income) from any
person pursuant to section 37, within 30 days of the end of each
month in which there was an obligation to withhold or collect such
tax, a return setting out each such circumstance and relevant
particulars of income tax so withheld or collected at source;
(e) the parties to any partnership or joint venture or joint asset
ownership, in respect of the taxable income derived by them
collectively as members of that partnership or joint venture or joint

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asset ownership, in such form as the Taxation Officer may require
or approve or allow; and
(f) every person who, under authority of section 40, is required by the
Minister, the Secretary or the Taxation Officer to provide a return
of information of any kind reasonably required by him for the
administration of the Act or the collection of income tax, within the
time allowed;
(3) Where any person is required by this section to furnish any return and
fails to do so within the time allowed (including any extension of time
allowed under section 44), that failure shall constitute:
(a) a Category 2 offence where, in the opinion of the Minister, the
failure involves wilful neglect or wilful default; and
(b) a Category 3 offence in any other case.
43 Extension of time for furnishing any return of income
(1) By written request to the Taxation Officer, a person liable to furnish a
return of income for any year may seek an extension of time for doing
this.
(2) The Taxation Officer shall consider any such request and shall advise the
person in writing of his decision within 10 working days from receipt of
the request.
(3) Where the Taxation Officer approves an extension of time, his advice to
the person shall indicate the new final date for complying with the request
made pursuant to section 40 or 42.
(4) Except with the prior approval of the Secretary, the Taxation Officer shall
not approve a new final date more than 4 months following the end of the
year (or substituted reporting period) to which the annual return of income
relates.
44 Extension of time for doing or furnishing any other thing
(1) By written request to a Taxation Officer, a person who is required
pursuant to sections 40 or 42:
(a) to do anything;
(b) to furnish anything;
(c) to furnish any information or return (not being a return of income);
or
(d) to provide any assistance requested of him pursuant to section 40;

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may seek an extension of time for doing this.
(2) The Taxation Officer shall consider any such request and shall advise the
person in writing of his decision within 10 working days from receipt of
the request.
(3) Where the Taxation Officer approves an extension of time, the written
advice shall indicate the new final date for complying with the request
made pursuant to sections 40 or 42.
DIVISION 3 – NOTICES OF ASSESSMENT
45 Notice of determination of loss
(1) Where in relation to any person and any year the Taxation Officer
determines that the aggregate of their deductible costs exceeds their gross
income, he shall issue a notice of loss determination.
(2) The provisions in this Act relating to the requirement to issue, and those
relating to the issue, of any notice of assessment shall apply with any
necessary alterations as if the notice of loss determination was a notice of
assessment.
46 Obligation on Taxation Officer to issue a notice of assessment, and
matters to be dealt with in any such notice
(1) The Taxation Officer, for each year, shall issue a notice of assessment for
that year to each person liable to furnish:
(a) an annual return of income; or
(b) a return of income requested pursuant to section 41(3).
(2) Any notice of assessment for any year shall include details for that year as
to the amount of:
(a) the person’s taxable income;
(b) the person’s assessed liability for income tax;
(c) the aggregate amount of tax settlements received on account of that
liability up to the date of issue of the notice ; and
(d) the person’s residual income tax liability as at that date of issue.
(3) The Taxation Officer shall, so far as practical, for each such person, issue
the notice of assessment within one month of the final date by which the
person was required to furnish his annual return of income pursuant to
section 41 (or, where appropriate, section 43).
(4) Where any person has not furnished an annual or other return of income
by the final date prescribed in section 41 (or, where applicable, any later

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date to which the Taxation Officer or the Secretary has pursuant to section
43 approved an extension of time) the Taxation Officer shall, subject to
subsection (6), issue a notice of assessment (being a notice of default
assessment):
Provided that the issue of any such default assessment shall not remove
the obligation of the person to furnish any return of income required under
this Act.
(5) Any notice of default assessment shall set out:
(a) the information prescribed by sub-section (2); and
(b) the basis upon which the amounts of taxable income (or where
applicable, non resident withholding income) and related income
tax liability as shown in the notice were determined.
(6) No notice of default assessment issued to any person for any year shall be
issued without the consent of the Secretary after satisfying himself that on
the basis of available information, the disclosures on the notice of default
assessment represent, in the circumstances, a reasonable assessment or
estimate of the likely taxable income and related income tax liability
which pertains to that person for that year.
(7) For the purposes of this section:
(a) where the Taxation Officer is not satisfied with the amount of
taxable income disclosed in any return of income; or
(b) where the Taxation Officer finds it necessary to issue a default
assessment, he may determine the amount of taxable income or
taxable income of a particular type by using an asset accretion basis
of computation, where he considers that basis will give a more
reliable or more reasonable reflection of the amount of that taxable
income.
(8) Any notice of assessment shall only be valid where the notice clearly sets
out the objection and appeal rights available to the person to whom it
relates.
(9) Any residual income tax liability determined under a notice of default
assessment shall be recoverable from the person to whom that liability
relates, or his agent, as if the liability was the person’s actual residual
income to year to which it relates.
(10) The issue of any notice o default assessment shall not preclude the issue
of any substitute notice of default assessment at any later stage.

Section 47 Income Tax Act 1992

Act 5 of 1992 Page 80


47 Exceptions to the requirements as to the issue of a notice of
assessment
(1) Where, pursuant to section 38, the liability of any person for any amount
of income tax is finally determined exclusively by reference to income tax
withheld or collected at source:
(a) the requirements of section 46 as to the issue of any notice of
assessment shall not apply in relation to that amount;
(b) the amount of tax so withheld or collected (or required to be
withheld or collected) at source shall be deemed to have been an
amount for which a valid notice of assessment was issued on the
last day of the month succeeding that in which withholding or
collection was required; and
(c) the objection and appeal provisions of this Act shall apply
accordingly in respect of the amount so withheld or collected:
Provided that any non resident to whom this section applies may make a
written request for a statement setting out the particulars which would
have appeared on a notice of assessment had one been issued on the last
day of the month succeeding that in which withholding or collection was
required.
48 Other circumstances requiring the issue of a notice of assessment
(1) Where in relation to any person and any year (whether or not that year has
ended):
(a) the Taxation Officer determines that any notice of assessment
should be issued prior to the normal time for issuing a notice of
assessment for that year; and
(b) the Minister so concurs,
the Taxation Officer may issue such a notice of assessment on that person
at any time.
(2) Any notice of assessment issued to any person pursuant to this section
shall disclose:
(a) the amount of that person’s taxable income (if necessary, and if it is
a notice of default assessment, reflecting the Taxation Officer’s
assessment or estimate of the amount of taxable income of that
person for the period to which the notice of assessment relates);
(b) the resultant assessed liability for income tax;
(c) tax settlements made on account of that liability up to the date of
issue of the notice of assessment; and

Income Tax Act 1992 Section 49

Act 5 of 1992
 Page 81

(d) the amount of the person’s residual income tax liability as at that
date of issue
(3) Any notice of assessment issued under this section:
(a) shall only be valid where the notice clearly sets out, or is
accompanied by a clear statement of, the objection and appeal
rights available to the person to whom it relates; and
(b) shall prescribe a final date for payment of the residual income tax
liability shown in the notice, and the provisions of section 58 and
section 59 with regard to interest and late payment penalties shall
apply accordingly from that date.
49 Notice of amended assessment
(1) Where the Taxation Officer becomes aware that any notice of assessment
issued by him to any person at any time in relation to any year overstates
the amount of the taxable income or assessed liability for income tax, he
shall as soon as practical thereafter issue a notice of amended assessment.
(2) Where in relation to any person and any year:
(a) that person has furnished an annual return of income and the
Taxation Officer has thereafter issued any notice of assessment with
respect to that year; and
(b) subsequently —
(i) following due enquiries by the Taxation Officer or the receipt
by him of information affecting the liability of that person to
income tax; and
(ii) where practical, following discussion between the Taxation
Officer and that person, the Taxation Officer considers (in his
best judgment objectively exercised having regard to the
provisions of this Act) and the Secretary concurs, that the
amount of taxable income returned is less that might
reasonably be expected,
the Taxation Officer shall issue to that person (or his agent or any
other appropriate person in accordance with the provisions of this
Act) a notice of amended assessment setting out:
(c) in an informative manner, the reasons for the notice of amended
assessment;
(d) the basis upon which that notice of amended assessment was
formulated; and
(e) the resultant amounts contemplated by section 46(2).

Section 50 Income Tax Act 1992

Act 5 of 1992 Page 82


(3) Any notice of amended assessment shall only be valid where the notice
clearly sets out, or is accompanied by a clear statement of the objection
and appeal rights available to the person to whom it relates.
(4) Subject to subsection (5), where the Taxation Officer issues a notice of
amended assessment, he shall treat any notice of assessment which it
replaces as withdrawn and of no effect.
(5) Notwithstanding the withdrawal of any notice of assessment issued to any
person for any year:
(a) any objection lodged against matters dealt with in the withdrawn
notice of assessment shall remain valid; and
(b) save insofar as the matter is disposed of by reason of the issue of
the amended notice of assessment, where appropriate, appeal
procedures may be initiated or continued as if the notice of
assessment had not been withdrawn.
50 Limitation of time for the issue of a notice of assessment
(1) Subject to the provisions of this section, in relation to any person and any
year, any notice of assessment may be issued at any time prior to the
expiry assessment of 5 years after the end of the year to which the notice
relates, whether that notice is to increase or to reduce an existing liability
to income tax.
(2) Notwithstanding sub-section (1), where the Taxation Officer at any time is
satisfied that in relation to the income tax liability of any person for any
year there has been:
(a) any fraud committed which impacts on any person’s income tax
liability for that year; or
(b) wilful neglect or wilful default in compliance with the requirements
of the Act which govern the determination of taxable income or the
furnishing of full and proper return of income (as contemplated by
section 41) for any person for that year,
he may at any time issue a notice of amended assessment in relation to
that person and that year:
Provided that where a notice of amended assessment is issued pursuant to
this sub-section outside the period prescribed in sub-section (1), no
amendment may be made to any matter to which the fraud or wilful
neglect or wilful default did not relate.
(3) The limitations prescribe in sub-section (1) shall not apply where and to
the consequential extent that the Taxation Officer has not been furnished
with the information he may reasonably require and has prior to the lapse

Income Tax Act 1992 Section 51

Act 5 of 1992
 Page 83

of that period of 5 years requested so as to allow the issue of any notice of
assessment.
51 Right of persons to require the issue of a notice of amended
assessment
(1) Where any person is able to satisfy Secretary that:
(a) in relation to any year any notice of assessment has been issued (or
is deemed by this Act to have been issued); and
(b) that notice of assessment is (in whole or in part) in respect of an
amount of income tax in excess of what, at the time that notice was
issued (or was deemed to have been issued) was properly payable
having regard to interpretations of the Act as they were then
understood,
then subject to section 50, the Secretary may require the Taxation Officer
to forthwith issue a notice of amended assessment reflecting the corrected
position.
52 Processing of income tax refunds
(1) Where following the issue of any notice of income tax refunds assessment
to any person and the offset of tax settlements against that person’s
personal income tax liability therein determined, there is any net income
tax credit owing to that person, then subject to sub-section (2), that
income tax credit (together with any interest credit in terms of section 65)
shall be paid to the person as soon as practical.
(2) No credit balance (comprising an income tax credit and any interest
credit) as contemplated by sub-section (1) shall be refunded to the extent
that there are at that time any other income tax liabilities owing by that
person which are due and unpaid; and for this purpose, other income tax
liabilities include:
(a) any amount of interest or penalty or fine imposed by or under this
Act; and
(b) any amount of income tax required to be accounted for in terms of
section 37 where the final date for payment has passed.
(3) In any case where the Minister so directs, the reference in sub-section (2)
to other income tax liabilities owing by a person shall include any
personal or other income tax liabilities (as contemplated by sub-section
(2)) of any person who is a person related to the person who has an
income tax credit balance to be refunded:

Section 53 Income Tax Act 1992

Act 5 of 1992 Page 84


Provided the Minister shall not make any such direction where he
considers that to do so would be inequitable having regard to the nature of
the relationship between the persons and the circumstances of the case.
(4) If for any reason any amount of net income tax credit (as contemplated by
sub-section (1)) is subsequently determined to be in excess of that which
was properly payable to the person having regard to the income tax
liability of that person as finally determined for any year:
(a) so much of the net, income tax credit (together with any applicable
interest credits) as was in excess of that payable to the person shall
be repayable to the Crown;
(b) unless the Secretary in any particular case otherwise determines,
interest calculated at the rates and on the general basis adopted in
Schedule 7 shall be payable for each month (or part thereof) of the
period of overpayment; and
(c) if and to the extent that repayment of the amount does not occur
within 3 months of the end of the month in which the Taxation
Officer gives the person advice of the overpayment, the provisions
in this Act relating to late payment penalties shall have application.
DIVISION 4 – PAYMENT OF INCOME TAX NOT ACCOUNTED FOR BY
WITHHOLDING AT SOURCE, AND THE RELATED INTEREST AND
LATE PAYMENT PENALTY PROVISIONS
53 Obligation to make a provisional tax payment by 30 September on
account of final liability to income tax
(1) This section applies to any person who, in the course of any year:
(a) carries on any one or more businesses in Tuvalu; or
(b) is a resident who carries on business outside Tuvalu,
and as at 31 August of that year could reasonably expect that he would
derive taxable income in excess of $50000 for that year.
(2) Any person to whom sub-section (1) applies shall by 30 September of that
year ensure that he has paid to the Crown (whether by way of a
provisional tax, payment or otherwise) amounts of income tax which (in
the aggregate) are not less than one third of the amount of the income tax
liability which is ultimately determined as applicable to his taxable
income for that year.
(3) To give effect to the requirements of sub-section (2), where appropriate,
any person to whom that sub-section applies shall pay to the Crown by 30
September of that year an amount which, together with the aggregate
amount of any other tax settlements applicable to the taxable income

Income Tax Act 1992 Section 54

Act 5 of 1992
 Page 85

derived by him in the period to 31 August, is sufficient to meet the
requirements of that sub-section.
(4) Any provisional tax payment required to be made by 30 September of any
year is referred to in this Act as the first provisional tax instalment.
54 Obligation to make a provisional tax payment by the last day of
February on account of final liability to income tax
(1) This section applies to any person who, in the course of any year:
(a) carries on any one or more businesses in Tuvalu; or
(b) is a resident who carries on business outside Tuvalu.
(2) Any person to whom sub-section (1) applies shall by the last day of
February following the end of that year ensure that he has paid to the
Crown (whether by way of a provisional tax payment or otherwise)
amounts of income tax which (in the aggregate) are not less than two
thirds of the amount of the income tax liability which is ultimately
determined as applicable to his taxable income for that year.
(3) To give effect to the requirements of subsection (2), where appropriate,
any person to whom that sub-section applies shall pay to the Crown by the
last day of February immediately succeeding that year an amount which,
together with the aggregate amount of any other tax settlements applicable
to the taxable income derived by him in the year just ended, is sufficient
to meet the requirements of that sub-section.
(4) Any provisional tax payment required to be made by the last day of
February following the end of any year is referred to in this Act as the
second provisional tax instalment whether or not a first provisional tax
instalment was required.
(5) This section shall not apply to any person and any year where:
(a) the person is able to demonstrate to the Taxation Officer that, on the
last day of February following the end of that year, he had
reasonable grounds for believing that his residual income tax
liability for that year would not exceed $1,000; or
(b) the person is one of a class of persons whom the Minister has
determined should be exempted from the requirements of this
section.

Section 55 Income Tax Act 1992

Act 5 of 1992 Page 86


55 Special provisions relating to the determination of provisional tax
obligations
(1) For the purposes of sections 53 and 54 relating to provisional tax
payments:
(a) where any taxable income of any person is also non resident
withholding income the liability to tax on which is ultimately
determined (pursuant to section 38) solely with reference to the
amount of income tax required to be withheld or collected at
source —
(i) that gross income and related taxable income;
(ii) the amount of income tax attributable thereto; and
(iii) the related non resident withholding tax,
shall be disregarded in all respects; and
(b) where in relation to any year, section 63 (relating to subsequent
events) applies in relation to any person, the amount of gross
income involved, and the income tax attributable thereto, shall be
disregarded in all respects.
(2) The Minister may at any time, by regulation:
(a) extend the categories of persons liable to make provisional tax
payments;
(b) vary thresholds specified in sections 53 and 54 or in any regulations
issued with respect to provisional tax payments; and
(c) vary the proportion of the annual income tax liability of any person
that must be paid by the dates prescribed in sections 53 or 54.
(3) Where, pursuant to section 6(7) the Secretary has approved alternative
dates for the making of the first or second provisional tax instalments, the
provisions of sections 53 and 54 shall be applied with the necessary
modifications.
56 Obligation to settle residual income tax liabilities
(1) Where, in relation to any year, any person has a residual income tax
liability which has not been paid in full by way of tax settlements, that
person shall effect payment of that residual income tax liability not later
than the final date for payment of that liability, being the last day of the
fourth month following the end of the year:
Provided that where in relation to any person and any business:
(a) the Secretary has approved a substituted annual reporting date; and

Income Tax Act 1992 Section 57

Act 5 of 1992
 Page 87

(b) pursuant to section 6(7) has also approved a substituted final date
for the payment of that person’s residual income tax liability,
that person shall effect payment by that substituted final date for payment.
(2) Where any person does not settle their residual income tax liability within
the time allowed by this section, subject to this Act, he shall be liable to
interest and penalty in accordance with the provisions of sections 58 and
59.
(3) Whenever the need arises, for the purposes of’ this Act any tax settlements
shall be regarded as being applied successively to —
(a) settlement of any liability arising under section 37 which is
overdue;
(b) settlement of any fines owing;
(c) settlement of any late payment penalties owing;
(d) settlement of any interest owing;
(e) settlement of income tax liabilities of previous years, in the order in
which they arose; and
(f) settlement of income tax liabilities of the current year,
and the settlements shall be appropriated accordingly:
Provided that these ordering rules:
(g) shall not apply to any amount of income tax withheld at source
pursuant to section 37 from any gross income derived by that
person; and
(h) may be modified by the Secretary for any particular case or class of
cases, where the circumstances so require.
57 Obligation to pay residual income tax not affected by certain events
(1) The obligation of any person to pay any amount of residual income tax
liability due in respect of any year shall not be affected by:
(a) any failure to furnish their annual return of income by the
applicable final date (as provided in this Act); or
(b) any failure by the Taxation Officer to issue a notice of assessment
before the final date for payment of the residual income tax.
(2) Where at any time in relation to any person and any year:
(a) any notice of assessment is issued to that person; and
(b) the final date for payment of residual income tax for that year was
prior to the date of issue of that notice; and

Section 58 Income Tax Act 1992

Act 5 of 1992 Page 88


then:
(c) the amount of income tax thus assessed shall be deemed to be an
amount which was required to be paid not later than the final date
for that person to make payment of his residual income tax liability
for that year (as contemplated by section 56).
(3) Save as provided in section 63, the obligation of any person to pay any
amount of residual income tax due in respect of any year shall not be
affected by any action which the person may have initiated:
(a) to object to any notice of assessment or any decision made under
this Act; or
(b) to appeal any determination or decision affecting the person’s
liability to income tax for the year.
58 Interests payable to the Crown on any amounts of income tax not
paid by the prescribed date
(1) Where any amount of income tax is required to be paid by a person to the
Crown by a final date for payment specified in this Act, and the amount is
not so paid, there shall be payable to the Crown interest (being the time
value of money due but not paid to the Crown) on the amount of income
tax not paid for each month (and part of a month) in the period following
the final date for payment during which the amount was unpaid.
(2) This section shall apply equally to amounts of income tax which are:
(a) the personal income tax liability of the person required to make the
payment; and
(b) amounts required to be withheld or collected and accounted for
pursuant to section 37.
(3) Any interest payable shall be calculated at the rate and on the basis
prescribed in Schedule 7:
Provided that where the aggregate amount of interest that would be
calculated in respect of any amount of unpaid tax owing by any person is
less than $5, the Taxation Officer may waive his right to charge and
collect that amount of interest.
(4) Interest payable on amounts of provisional tax unpaid shall cease to run:
(a) in the case of the first provisional tax instalment (where applicable),
on the final date for the second provisional tax instalment; and
(b) in the case of the second provisional tax instalment (where
applicable), on the final date for payment of the residual income tax
for the year,

Income Tax Act 1992 Section 59

Act 5 of 1992
 Page 89

and interest on any amounts not paid shall be subsumed by the interest
calculated in respect of residual income tax (if any) not paid by the final
date for payment of that liability.
59 Late payment penalty payable to the Crown where any unpaid
residual income tax remains outstanding for an extended period
(1) Where any amount of residual income tax (including any amount which
should have been but was not in fact paid by way of provisional tax) is not
paid within a period of 3 months following the date which, in relation to
that person, is the final date for payment of residual income tax in
accordance with section 56, there shall be payable (in addition to the
interest payable in accordance with section 58) a late payment penalty of
5% of the amount of income tax (other than interest) unpaid.
(2) For every further 3 completed months (after the 3 month period referred to
in sub-section (1)) during which any income tax (other than interest and
penalty) remains unpaid, there shall be imposed a further late payment
penalty of 5% of the amount of income tax (other than interest and
penalty) not paid.
(3) Where following the receipt of any request in writing for relief from late
payment penalties, the Secretary considers it appropriate to grant relief, he
may approve that those penalties (but not, pursuant to this section, any
amount of interest) be waived either in whole or in part.
(4) Any decision of the Secretary with respect to an application by any person
for relief from late payment penalties shall be notified in writing to that
person.
60 Late payment penalty payable to the Crown where any income tax
required to be withheld or collected at source remains outstanding
for an extended period
(1) Where any amount of income tax which was required to be withheld or
collected at source pursuant to section 37 is not accounted for within the
time allowed under that section, and remains unaccounted for 3 months
following the final date for payment there shall be payable (in addition to
the interest payable in accordance with section 58) a late payment penalty
of 5% of the amount of income tax (other than interest) not paid.
(2) For every further 3 completed months (after the 3 month period referred to
in sub-section (1)) during which any such income tax (other than interest
and penalty) remains unpaid, there shall be imposed a further late payment
penalty of 5% of the amount of income tax (other than interest and
penalty) not paid.

Section 61 Income Tax Act 1992

Act 5 of 1992 Page 90


(3) Where, following the receipt of any request in writing for relief from late
payment penalties, the Secretary considers it appropriate to grant relief he
may approve that those late payment penalties (but not, pursuant to this
section, any amount of interest) be waived either in whole or in part.
61 Special provisions applying to persons in default of their
obligations with respect to income tax requires to be withheld or
collected at source
(1) For the purposes of the provisions of this Act relating to the collection of
income tax from any person, any amount of income tax withheld or
collected (or which should have been withheld or collected) and which
was not accounted for is deemed to be an income tax liability of that
person.
(2) Where in any particular situation the Secretary considers it appropriate to
do so, he may relieve any person of his obligation to make payment to the
Crown of all or any of the amount or amounts which were or should have
been withheld or collected if (and to the extent that) the amounts or
amounts will be recovered directly or indirectly from the person who
derived the gross income to which the default or omission related, or his
agent.
(3) Where sub-section (2) applies:
(a) the Secretary shall notify the person in writing of his decision (and,
if applicable, any conditions attaching);
(b) subject to the provisions of this Act, the person so relieved of the
obligation shall still be liable to any interest and late payment
penalties provided for in this Act with respect to late settlement of
the income tax liability; and
(c) the Secretary may request the Minister, and the Minister may (in his
sole discretion) approve that the default or omission shall not be
treated as a Category 1 offence.
62 Circumstances where the provisions relating to the charging of
interest and late payment penalty will not apply
(1) Subject to this section, notwithstanding any provision of this Act requiring
the charging of interest on amounts of income tax not paid by the relevant
final date for payment:
(a) where any part of such liability arises by reason of events occurring
after the final date prescribed in or under this Act for furnishing the
annual return of income for that year; and

Income Tax Act 1992 Section 63

Act 5 of 1992
 Page 91

(b) the relevant amount of gross income to which that part of the
liability relates was required or able to be included in gross income
derived for the year to which that return relates,
there shall be no interest charge on that part of the amount of that income
tax liability.
(2) Where any amount of income tax liability is a liability of the type referred
to in sub-section (1), and that liability remains unpaid after a period of 3
months from the end of the month in which was issued any notice of
assessment giving effect to that recognition of the gross income to which
that liability relates, the provisions of this Act with respect to interest and
late payment penalty shall apply to any continuing period of non-payment
after the end of that 3 month period as if that were the final date for
payment of that income tax liability.
63 Minister may provide relief from late payment penalties in respect of
income tax liabilities subject to objection and appeal procedures
(1) In any case where objection or appeal procedures have been initiated, the
Minister, where he considers the circumstances so warrant, may approve
the deferral of the payment of any income tax liability attributable to any
matter validly subject to objection or appeal proceedings, pending the
outcome of those proceedings.
(2) Where and to the extent that sub-section (1) applies, the Minister:
(a) may determine that in relation to amounts in dispute which are
subject to the valid notice of objection or appeal proceedings, there
shall be no exposure to the late payment penalties contemplated by
section 59 until the expiry of the third month following the end of
the month in which the matter under objection or appeal is resolved;
or
(b) may not, pursuant to this section, waive any right of the Crown to
collect interest in respect of any unpaid income tax liability finally
determined to be validly due to the Crown.
(3) Where in relation to any person and any year:
(a) the person of his own volition furnished a full and proper return of
income (as contemplated by section 41(3);
(b) any notice of assessment is issued to the person; and
(c) the final date for payment of residual income tax for that year was
prior to the date of issue of that notice of assessment,
then:

Section 64 Income Tax Act 1992

Act 5 of 1992 Page 92


(d) where and to the extent that the notice of assessment reflects a
personal income tax liability which is greater than that
contemplated by a full and proper return of income furnished by the
person;
(e) the person to whom it was issued has made a request in writing for
relief from interest or late payment penalties (or both); and
(f) the Secretary considers it appropriate to provide full or partial relief
from interest or late payment penalties (or both) in relation to the
additional income tax liability thus arising,
the Secretary may:
(g) in any such case waive all or part of any late payment penalty (but
not pursuant to this paragraph, any interest) applicable to non-
payment of that portion of the additional income tax liability by the
relevant final date for payment; or
(h) where a significant portion of that additional income tax liability is
accountable to facts, circumstances or statutory interpretations
which could not reasonably have been known to the person at the
time of furnishing the return (so that no default or neglect on the
part of the person assessed can be implied), set a new final date for
payment, and the provisions of this Act relating to the payment of
interest and late payment penalty shall apply accordingly.
64 Right of persons to secure an early refund of income tax overpaid
(1) Where in relation to any person and any year:
(a) tax settlements have been made; and
(b) upon written request from that person for an early refund of all or
part of those tax settlements, the Minister is satisfied that the
aggregate amount of those tax settlements will significantly exceed
the person’s liability to income tax for the year,
then having regard to all the circumstances of the case and the
requirements of this section, the Minister may authorise an early refund of
an amount corresponding with all or part of what he considers to be the
excess amount of tax settlements.
(2) In authorising any early refund of income tax payments in accordance
with this section, the Minister shall have regard to any amount of any
income tax liability due and unpaid by the person.
(3) The provisions of section 52(4) with respect of refunds in excess of that
properly refundable shall apply with the necessary modifications to any
amount refunded pursuant to this section.

Income Tax Act 1992 Section 65

Act 5 of 1992
 Page 93

65 Interest credit due to any person entitled to a refund of income tax
(1) Where in relation to any year any person has effected tax settlements
which leave the person having overpaid their personal liability to income
tax (as determined under section 5), subject to this section, that person
shall be entitled to an interest credit.
(2) Interest credits shall run from the earlier of:
(a) the last day of the month of issue of any notice of assessment (other
than a notice of default assessment) confirming the overpayment;
and
(b) three months from the end of the relevant year (or if later, the
annual reporting date) in relation to which the overpayment of tax
occurred.
(3) Interest credits shall be calculated at the rate prescribed in Schedule 7, on
the basis specified therein.
(4) In calculating the amount of any interest credit under this section, no
regard shall be had to tax settlements made after the final date for
payment of the person’s residual income tax liability for the relevant year
(being the relevant date contemplated by section 56).
DIVISION 5 – OFFENCES AGAINST THE ACT
66 Situations involving fraud and complicity
(1) Where any person (either alone or with others) wilfully, with intent to
evade his responsibilities under the Act to pay any amount of income tax
for which he is liable or required to account for as agent:
(a) makes use of any fraud or authorises the use of any fraud;
(b) makes any fraudulent claim for the repayment of income tax; or
(c) enters into any arrangement with a purpose of rendering that person
or any other person unable to meet any income tax liability
(including any liability arising under section 37),
that action shall constitute a Category 1 offence.
(2) Where any person wilfully and knowingly aids or abets any other person
in any offence with the intent of enabling that other person to evade his
responsibilities under the Act to pay and account for the correct amount of
income tax for which he is liable or required to account as agent, that
action shall constitute a Category 1 offence.

Section 67 Income Tax Act 1992

Act 5 of 1992 Page 94


67 Classification of offences and determination of whether an offence
has been committed
(1) Offences under this Act are classified according to their nature as
Category 1, Category 2 or Category 3 offences.
(2) A person shall only be considered guilty of committing a Category 1 or
Category 2 offence where subsection (4) does not apply, and either:
(a) that guilt has been established in the Courts; or
(b) the person has signed an admission of guilt.
(3) A person shall only be considered guilty of committing a Category 3
offence where sub-section (4) does not apply, and either:
(a) the Minister has, on an objective determination of all the evidence,
so determined; or
(b) the person has signed an admission of guilt.
(4) Notwithstanding the preceding provisions of this section, it shall be open
to the Minister to determine that any person shall be regarded as not
having committed any offence of which he has been charged or might
otherwise be charged where and to the extent that:
(a) there exist mitigating circumstances (as defined in section 2) which
gave rise to the offence; and
(b) the Minister is satisfied that so far as practical, the person remedied,
or will in fact remedy, any default at first reasonable opportunity:
Provided that nothing in this sub-section shall be taken as:
(c) relieving any person to whom this section applies from any interest
or late payment penalty chargeable under this Act; or
(d) precluding the granting of relief from interest or late payment
penalties otherwise chargeable where other provisions of this Act so
allow.
(5) Where a person is guilty of an offence, and remains liable to any penalty
which the Court (or where appropriate, the Minister) may determine, that
penalty shall be determined having regard to:
(a) the provisions of sections 68 to 71 inclusive;
(b) the seriousness of the offence;
(c) the person’s previous history of offending;
(d) the need to discourage further offending by that person and others;
(e) the nature of any other offences of which the person is concurrently
guilty or is being charged; and
(f) the general pattern and level of fines applied to other persons who
have committed or may commit offences against the Act.

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68 Penalties for Category 1 offences
(1) Where any offence is a Category 1 offence, being:
(a) a wilful intent to evade income tax (as described in section 66);
(b) complicity in a matter involving a wilful intent to evade income tax
(as described in section 66);
(c) an offence relating to the obligation to withhold or collect monies in
trust for the Crown and to account for these within a prescribed
time; or
(d) any other offence specifically declared by the Act to be a Category
1 offence,
then the person charged with the offence shall;
(e) upon the provision to, and acceptance by, the Minister of an
admission of guilt, then subject to section 71, pay a default fine
which reflects the seriousness of the offence; or
(f) upon conviction, be liable to a fine of up to $15000 or a term of
imprisonment of up to 3 years, or both.
(2) Nothing in this section shall be taken as:
(a) relieving any person to whom this section, applies from any interest
or late payment penalty chargeable under this Act; or
(b) precluding the granting of relief from interest or late payment
penalties otherwise chargeable where other provisions of this Act
so allow.
69 Penalties for Category 2 offences
(1) Where the offence is a Category 2 offence, being:
(a) wilful neglect or wilful default in a matter involving the
maintenance and retention of records (as required by section 39);
(b) any failure without reasonable cause to respond appropriately to
any valid requests made pursuant to sections 40 or 42; or
(c) any Category 2 offence other than one to which paragraphs (a) or
(b) apply,
then the person guilty of the offence shall:
(d) upon the provision to and acceptance by the Minister of an
admission of guilt, then subject to section 71, pay a default fine
which reflects the seriousness of the offence; or
(e) upon conviction, be liable to a fine of up to $10000 or a term of
imprisonment of up to 2 years, or both.

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(2) Nothing in this section shall be taken as:
(a) relieving any person to whom this section applies from any interest
or late payment penalty chargeable under this Act; or
(b) precluding the granting of relief from interest or late payment
penalties otherwise chargeable where other provisions of this Act so
allow.
70 Penalties for category 3 offences
(1) A Category 3 offence, is any offence under this Act which is not a
Category 1 or a Category 2 offence, and whether or not specifically
declared by the Act to be a Category 3 offence.
(2) Any person who commits a Category 3 offence shall be guilty of an
offence and shall upon conviction be liable to a fine of up to $2,500.
(3) Nothing in this section shall be taken as:
(a) relieving any person to whom this section applies from any interest
or late payment penalty chargeable under this Act; or
(b) precluding the granting of relief from interest or late payment
penalties otherwise chargeable where other provisions of this Act so
allow.
71 Application of penalties in cases where a Category 1 or Category 2
offence is admitted
(1) In any situation where a person considers that in relation to any offence he
would or might be subject to a Court imposed fine or imprisonment or
both, that person:
(a) may make a written offer of an admission of guilt, and of his
willingness to volunteer the immediate payment of a lump sum by
way of penalty for any such admitted offence; and
(b) in turn require the Minister with the consent of the Attorney-
General to undertake that on receipt of the amount offered that he
will confirm in writing that he will not be formally prosecuted.
(2) If the Minister with the consent of the Attorney-General considers that the
amount of the lump sum offered by way of penalty is, in all the
circumstances of the case, a suitable amount reflecting the criteria in
sections 67(5)(b) to 67(5)(f) he may accept the offer on behalf of the
Crown.
(3) Where the Minister with the consent of the Attorney-General accepts any
offer (of the type referred to in sub-section (1)) which has been made by

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any person in respect of any Category 1 or Category 2 offence, that
acceptance shall constitute an agreement and the Crown shall honour the
terms of that agreement.
(4) Any such agreement shall not preclude the imposition of unrelieved
interest or unrelieved late payment penalties to amounts of income tax
unpaid.
(5) Where the person defaults under the agreement, then the terms of that
agreement shall be of no effect.
(6) Where the Minister with the consent of the Attorney-General declines to
accept any offer made under sub-section (1), the matter shall be
determined by the Courts.
DIVISION 6 – OBJECTION AND APPEAL RIGHTS AND
PROCEDURES
72 Objection and appeal procedures
(1) Subject to this section, any person may:
(a) object to any matter in any notice of assessment issued to him;
(b) object to any decision of the Taxation Officer, the Secretary or the
Minister, unless in the case of a decision by the Minister, this was
made with the prior consent of Cabinet; and
(c) object to any matter in respect of which rights of objection are
conferred on the person by this Act.
(2) No objection or appeal proceedings may be prosecuted where this is
debarred:
(a) by any provision of this Act; or
(b) by any regulation.
(3) Where the objection relates to a matter in a notice of amended assessment,
the objection may only relate to a matter altered by the notice of amended
assessment, and only to the extent of that alteration.
(4) Any objection shall be made in writing addressed to the Secretary and
received by the Secretary within two months of the date of issue of the
notice of assessment or the date upon which the advice of the decision
was issued.
(5) Notwithstanding sub-section (4), the Secretary may treat any objection
received after the date by when it was required to be received by him as a
valid objection if he considers it fair and reasonable to do so.

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(6) Any notice of objection furnished by or on behalf of any person shall only
be of force and effect if it clearly indicates the grounds for the person
objecting to the matter specified in the notice of objection.
(7) If the objection relates to a decision or consent of the Minister, the matter
shall be referred to the Cabinet for decision and instruction to the
Secretary.
(8) If the objection relates to a decision or consent of the Secretary, the matter
shall be referred to the Minister for decision and instruction to the
Secretary.
(9) In any case where sub-sections (7) and (8) do not apply, the matter shall
be decided by the Secretary.
(10) If the officer or officers to whom the objection is referred decide (after
making such enquiries as that officer or officers considered necessary) to
accept the objection (either in whole or in part) then, as appropriate, the
Secretary shall:
(a) instruct the Taxation Officer to issue a notice of assessment to
reflect that decision, and the Taxation Officer shall issue such
notice as soon as is practical; or
(b) take such action as may be required to reflect the acceptance or
partial acceptance of the objection,
and in either case, shall as soon as practical following that acceptance
advise the objector in writing of the decision.
(11) Any person who is notified that an objection made by him has not been
accepted (either in whole or in part) may apply in writing to the Senior
Magistrate for a decision in respect of the matters to which objection was
taken.
(12) Where any application by way of appeal has been made to the Senior
Magistrate, a copy of such application shall be served by the Clerk to the
Senior Magistrate’s Court on the Secretary.
(13) The Senior Magistrate shall hear any application made under sub-section
(11) as soon as practical, and on such hearing may:
(a) order the proceedings in such manner as he may feel fit;
(b) hear evidence on oath and summon witnesses; and
(c) either:
(i) refer the matter back for further decision by the Secretary; or
(ii) refer the matter for consideration by any other person or
persons,
in either case with or without a requirement that —

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(iii) particular matters be taken into account; or
(iv) that the matter later be referred back to him for further
deliberation and decision; or
(d) confirm, reduce, increase, or annul the notice of assessment, or
confirm, alter or rescind any decision made or substitute his own
decision.
DIVISION 7 – ADMINISTRATION
73 Income tax to be payable notwithstanding prosecutions
(1) Save as provided in this section, the institution of any prosecution against
any person for standing any offence under this Act shall not relieve that
person from liability to pay any amount of income tax which he may be
liable to pay.
(2) Where an order is made under section 74, the person subject to the order
shall be relieved of the liability to pay income tax to the extent that the
order is satisfied.
(3) The obligations imposed under sub-section (1) shall not apply in any case
where a court, in the special circumstances of any particular case,
otherwise directs.
74 Order for the payment of income tax
(1) Subject to this section, a court before which a person is convicted of an
offence under this Act, on application or otherwise, may make an order
(hereafter referred to as a ‘tax order’) requiring that person to pay any
amount of income tax owing as a result of that offence.
(2) In determining whether any tax order shall be made against any person,
and in determining the amount to be paid by that person under such tax
order, the Court shall have regard to his economic circumstances as far as
they appear or are known to the Court.
(3) Any tax order made under this section may be enforced in the same
manner as a compensation order can be enforced under the provisions of
the Penal Code sections 31, 33 and 34.
75 Recovery of income tax
(1) Any income tax assessed or imposed upon or required to be accounted for
by any person under this Act shall be recoverable as a Crown debt and
may be sued for and recovered in a court of competent jurisdiction by the

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Secretary or any officer authorised by him in writing, with full costs of
that suit from the person.
76 Certificate of income tax due
In any proceedings other than a hearing of an appeal under section 72 the
production of a certificate signed by the Secretary giving the name and address
of the defendant and the amount of income tax due shall be sufficient evidence
that the amount of income tax was assessed and is payable.
77 Responsibility of the Secretary
(1) The Secretary shall:
(a) undertake the administration of this Act;
(b) account for the income tax levied hereunder;
(c) be responsible for the due care and management of that income tax
and of all matters incidental thereto; and
(d) collect such information relating to the patterns of gross income and
any related costs, and of the exempt income and of the taxable
income, of any person, as may be required to facilitate the
preparation of government’s periodic revenue estimates.
(2) The Minister may appoint such officers as may be necessary to assist the
Secretary in the proper performance of his responsibilities, but any such
appointments shall not relieve the Secretary of the responsibilities
imposed by sub-section (1)
(3) Where, in accordance with this Act, any act is required to be undertaken
by the Taxation Officer or person appointed under sub-section (2)
responsibility, for ensuring the proper execution of this Act shall rest with
the Secretary.
(4) With the prior consent of Cabinet and subject to sub-section (6), the
Minister may authorise the Secretary to make decisions on particular
matters set out in this Act, subject to any conditions and the parameters
determined by Cabinet.
(5) With the prior consent of the Minister, and subject to sub-section (6), the
Secretary may authorise either:
(a) Any person appointed by the Minister under sub-section (2); or
(b) the Taxation Officer,
to make decisions on particular matters set out in this Act (but not being
matters referred to in sub-section (4)), subject to any conditions and the
parameters determined by the Minister.

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(6) In no case:
(a) may any authority be delegated to another person where this would
have the effect of abrogating any peer review expectation embodied
in this Act; and
(b) may Cabinet delegate any decision making responsibilities
conferred under this Act.
78 Responsibility of the Taxation Officer
(1) Subject to the provisions of this Act, it shall be the responsibility of the
Taxation Officer to ensure that so far as practical, the Crown collects the
correct amount of income tax in respect of all gross income to which this
Act applies.
(2) For the purposes of sub-section (1), the Taxation Officer shall:
(a) obtain such information he is entitled to require (whether pursuant
of sections 40 or 42, or otherwise);
(b) issue such notice of assessment as may be required to be issued
from time to time; and
(c) cause the Secretary to take such steps or proceedings as he
considers appropriate to collect monies properly due to the Crown
and which may be collected in accordance with this Act.
(3) In the exercise of his responsibilities under this Act, and this section in
particular, the Taxation Officer:
(a) may disregard small amounts of income tax that are uneconomic to
collect; and
(b) shall endeavour to apply the requirements of the Act in a pragmatic
and practical way, but always consistent the with scheme and
purpose of the Act.
79 Requirement as to secrecy
(1) Subject to this section, the Minister, the Secretary, the Taxation Officer,
the Auditor General and every other person concerned in or reviewing the
administration of this Act shall regard and deal with all documents and
information relating to the income or circumstances of any other person
which may come into their possession in the course of their duties as
secret.
(2) Where any person referred to in sub-section (1) is involved in the conduct
of any objection and appeal proceedings or in any prosecution of an
alleged offence under this Act, that person may disclose information

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relating to the income or circumstance of any other person to the extent
necessary for such proceedings or prosecution.
(3) Any person violating the provisions of this section shall be guilty of a
Category 3 offence.
80 Procedure where Minister is a party to an alleged offence or has a
conflict of interest
In any case where the person alleged to have committed an offence is the
Minister, or the Minister considers that he has a conflict of interest or is
otherwise unable to deal objectively with a matter requiring his attention or
decision, the matter shall be dealt with by decision of Cabinet.
81 Form of returns etc
(1) Save as may be otherwise provided in this Act, the Minister may from
time to time by notice specify the form of return, notice or other document
required for the purpose of this Act.
(2) Where any return, notice or other document has been specified, it shall be
in the form so specified.
PART 8 – ABILITY OF THE GOVERNMENT TO MODIFY
THE PROVISIONS OF THE ACT
82 General power for the Minister to issue regulations and amend
Schedules to the Act
(1) Where:
(a) the Act specifically so provides;
(b) it will facilitate the exercise by the Secretary or the Taxation
Officer of any powers available to them under the Act;
(c) in any case for the better carrying out of the administrative and
collection provisions of the Act;
(d) the Cabinet considers it appropriate to delay the introduction or
suspend the operation of any provision (not being a relief
provision); or
(e) it is appropriate to rescind and reissue any existing regulations,
the Minister may issue regulations.

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(2) The Minister (with the consent of Cabinet first obtained) may determine
changes or additions to any item incorporated in the Schedules to the Act,
and give effect to these changes by regulation.
83 Specific powers to alter the Act in the commercial or economic
interests of Tuvalu
(1) Where and to the extent that the Minister (with the prior approval of
Cabinet) considers it to be the commercial or clearly in the overall
commercial or economic interests of Tuvalu to do so, he may (subject to
the provision of this section) either:
(a) in relation to any major new or embryonic venture; or
(b) in relation to a major expansion of any existing venture,
issue regulations setting out:
(c) how in relation to that venture, any existing provisions, conditions,
reliefs, entitlements, or obligation contemplated by the Act are
varied so that they either no longer apply or apply in a manner
differently to that provided in the Act.
(2) Where it is proposed to issue any regulations so as to give effect to any
matter or circumstance covered by the provision, of sub-section (1), the
Minister shall first give full public notice including radio broadcast if
practical of his intention to issue such regulations, and the relevant details
of the matters intended to be set out therein.
(3) Any person who considers it inappropriate that regulations be issued
according to the tenor of the proposed regulations, shall have the right to
make formal representations (either in writing, or orally, or both) to the
Minister as to matters of concern, provided this is done within 6 weeks of
the date of full public notice of the proposed regulations.
(4) The Minister:
(a) shall make himself available for the purpose of hearing any oral
representations contemplated by sub-section (3);
(b) shall give a full and fair hearing to any matters raised in oral
representations;
(c) shall give full and fair consideration to any matters raised in written
representations; and
(d) shall fully and fairly advise Cabinet of the nature of all the concerns
expressed in all written and oral representations.
(5) Once Cabinet is satisfied that:

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(a) the concerns advised by the Minister pursuant to sub-section (4) are
suitably dealt with in amendments which will be made to the
proposed regulations;
(b) suitable further or alternative provision (by way of financial
assistance or otherwise) have been or will be made to ensure that
affected persons are not unfairly disadvantaged; or
(c) the remaining concerns raised by those who made representations
are in its opinion either not justified or are outweighed by the
anticipated economic benefits to Tuvalu,
it may authorise the Minister to formally issue the regulations and any
other appropriate public notice incorporating the changes or further
measures now agreed to.
(6) No regulations issued under authority of this section shall be of any force
or effect until the procedures outlined have been complied with, and shall
apply only prospectively.
84 Power of the Minister to conclude treaties with other countries
(1) The Minister may, with the prior consent of Cabinet, enter into
arrangements with any other country with a view to concluding treaties
regulating income tax matters affecting the investments of a resident in
that other country or arrangements between a resident and a person who is
a resident of that other country.
(2) Any such treaty, once ratified by the governments of the treaty partners,
shall take effect according to its tenor, as if the treaty were part of the Act,
and notwithstanding any provision of the Act.
(3) The Minister may set out in regulations rules to give effect to the
operation of any treaty entered into, and those regulations shall remain in
force so long as the treaty remains in force, or until they are otherwise
amended or withdrawn by the Minister.
(4) Without in any way limiting the matters in respect of which the Minister
may make rules to give effect to the operation of a tax treaty, such rules
may determine:
(a) how particular provisions of the treaty will be interpreted and
applied; and
(b) the procedures to be followed for making a claim for a refund of tax
paid in excess of the maximum amount permitted by the treaty.

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85 Power of the Minister to issue a certificate of exemption or
regulations authorising non compliance with the requirements of
the Act
Where, on application by any person or class of persons, the Minister is satisfied
that for whatever reason, it is impractical for that person or class of persons to
comply with all or any of the requirements of the Act:
(a) he may issue a certificate of exemption to that person or those
persons; or
(b) he may issue regulations suspending the operation and application
of the relevant provision or provisions of the Act; and
in either case, should he see fit, setting out alternative administrative rules and
procedures to meet the needs of the situation.
PART 9 – GENERAL PROVISIONS
86 Repeals and savings
(1) Subject to this section, the Income Tax Act, Cap 52 is repealed on the
coming into force of this Act.
(2) The provisions of the Income Tax Act, Cap 52 shall continue to apply to:
(a) the determination or payment of any income tax liability;
(b) the fulfilment of any obligation;
(c) the exercising of any right;
(d) the taking of any action; and
(e) any other matter or thing,
that pertains to any year prior to the coming into force of this Act.
(3) Where any amount has been allowed as a deduction in determining the
taxable income (or chargeable income) of any person for any year prior to
the coming into force of this Act (or any relevant part thereof), and that
amount has directly or indirectly been recovered during any year this Act
is in force, the amount so recovered is hereby deemed to have been a
deductible cost for the purpose of this Act, and its recovery to be gross
income in the year of recovery.

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87 Transitional provision on this Act coming into force
(1) Notwithstanding anything contained in this Act, where applicable, the
provisions of Schedule 8 shall operate to alleviate hardship and avoid
inequities which would otherwise arise on this Act coming into force.
(2) Where:
(a) on the coming into force of this Act any income or revenues of the
Crown or any statutory corporation were not previously subject to
income tax pursuant to the provision of a statute other than the
Income Tax Act, Cap 52; and
(b) the exemption conferred by paragraph 3 of Part 4 of Schedule 1 is
determined by regulation not to apply from any particular date,
then the issue of any regulation terminating the exemption shall be treated
as valid repeal of the provisions in that other statute which conferred that
income tax exemption.
(3) The provision of this Act relating to the liability of non residents to
income tax on service fees, and the liability of the payer of service fees to
withhold tax therefrom, shall not take effect until a date notified by the
Minister by regulation.
(4) The following sections and schedules shall come into force from a date or
different dates to be determined by the Minister and of which full public
notice is given in advance of that date or such other date as the case may
be:
(a) Part A of Schedule 4 (relating to persons whose gross income from
specified sources is to be determined as a specified percentage of
throughput);
(b) paragraph 4 of Part A of Schedule 5 (relating to the amount of tax
to by withheld at source from certain payments to non residents);
and
(c) Part B of Schedule 5 (relating to the amount of tax to be withheld at
source from certain payments to non residents).

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 Page 107

Schedule 1
EXEMPT INCOME
[Section 2] The following categories of income shall be exempt from income tax to the extent
indicated:
PART 1: Personal receipts and benefits
1. Travelling, accommodation, subsistence and entertainment allowances paid to
officers in the public service.
2. Travelling, accommodation, subsistence and entertainment allowances paid to
persons not in the public service to the extent that the Secretary is satisfied that they are
reasonable in amount and not in excess of what would be appropriate for an officer in
the public service.
3. Any amounts, and the value of any benefits derived by an employee by reason of his
attendance at or participation in any formal course, study or work instruction
programme, or similar, insofar as those amounts or benefits:
(a) constitute the cost, or contribution to the cost of tuition or course or
programme fees and related costs, or travelling, accommodation and
subsistence in relation to that attendance or participation; and
(b) are not in lieu of emoluments which any person would, or in all likelihood
would, have been entitled.
4. The value of any scholarship or bursary awarded to a person for the purpose of full
time instruction at a university, college, school or other place of instruction:
Provided that where the scholarship or bursary is provided by an employer to an
employee or a person related to an employee, this exemption shall not apply to the
extent that the value of the award is in lieu of emoluments which any person would, or
in all likelihood would have been entitled.
5. The amount of any allowances and the value of any benefits derived by volunteer
workers in respect of work undertaken for non profit making aid organisations where:
(a) the person deriving those allowance or benefits:
(i) is not a resident of Tuvalu; or
(ii) would not be resident in Tuvalu but for being present in Tuvalu to
render those services; and

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(b) either:
(i) the allowances are of an amount and the benefits are of a value that
do not exceed those which the Minister from time to time has
determined by regulation in relation to any case or class of cases,
and for any period or periods; or
(ii) the government of Tuvalu has entered into an agreement with the
aid organisation or the country in which the central management of
that organisation is based, for particular allowances and benefits to
be exempt; and
the allowances are either:
(c) no more than is appropriate to cover the costs of accommodation and
subsistence of that person in undertaking the volunteer work; or
(d) the allowances are of a type and amount contemplated by the agreement
entered into with the aid organisation or country concerned.
6. Emoluments or other amounts payable in respect of duties performed in Tuvalu by
any person who is present in Tuvalu solely for the purposes of performing those duties,
where:
(a) such emoluments or other amounts are paid from overseas sources, and
the services are performed pursuant to any arrangement to which the
Crown is party and that arrangement provides for those emoluments or
other amounts to be exempt,
and in this regard:
(b) if the arrangement to which the Crown is a party so provides, this
exemption shall apply equally to other gross income of that person (and, if
applicable, his immediate family).
7. A gratuity or bonus received by a person pursuant to a written contract of
employment, where it is derived by the person on the termination, expiry, renewal or
extension of that contract, if the person is either:
(a) exempt from the provisions of the Tuvalu Provident Fund Act by virtue of
section 2 of Schedule 1 to that Act; or
(b) is a member of an approved fund, and in respect of that fund no
contributions are payable by the person’s employer (or by any other
person by arrangement with that employer).
8. Interest payable by the Crown on any income tax credits refunded.
9. Any amount received or receivable by any person by way of alimony or allowance
from his spouse or former spouse where the amount does not ( or will not) constitute a
specified alimony payment.

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10. The amount of any distribution by the executor, administrator or trustee of any trust
or estate to the extent that the amounts out of which they are paid have been subject to
tax in Tuvalu in the hands of the executor, administrator or trustee, or in the hands of a
beneficiary in that trust or estate.
11. One half of the amount of any annuity received under an approved annuity contract
(as defined in section 2).
PART 2: Business and investment receipts and benefits
1. All income derived from the sale of copra cut within Tuvalu, if that income is
derived otherwise than from or in the conduct of a business.
2. The income of:
(a) any benevolent, religious, educational, charitable, cultural or amateur
sporting institution or organisation approved by the Minister by
regulation;
(b) any organisation which is at the time an approved community service
organisation;
(c) any trade union; and
(d) any local authority:
Provided that:
(e) this exemption shall not extend to the income derived by any such
institution or organisation from any business it conducts or from any
passive investments which it holds, unless the annual taxable income so
derived is less than $250 in the aggregate; and
(f) in the case of an institution or organisation referred to in sub paragraphs
(a) or (b), the exemption shall only operate so long as any conditions
stipulated by the Minister are met.
3. Income derived by a non resident from fishing activity in Tuvalu’s exclusive
economic zone where that fishing activity was undertaken pursuant to an international
fishing licence or similar issued by the Crown.
4. Income arising from the sale of fish and handicraft by a resident individual.
5. Any service fees payable to a non resident not carrying on business in Tuvalu to the
extent that:
(a) the amount relates to services provided outside Tuvalu to or on behalf of
any person resident in Tuvalu or his representative; and
either:

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(b) at the time the payment is made by or on behalf of that person, the
aggregate amount of consideration payable by way of service fees to that
non resident person (and any related person) in that year does not exceed
$2500 (or such higher sum as the Minister may from time to time
determine by Regulation);
(c) the service fees are of a class which the Minister has determined by
regulation should be exempt; or
(d) the service fees would have given rise to a deductible cost to the payer,
and that payer has in writing advised the Taxation Officer he shall not
claim a deduction for or in relation to the expenditure, and does not do so.
PART 3: Dividends
1. Any dividend derived by any person resident in Tuvalu from a resident company.
2. The amount of any dividend derived by any person to the extent to which that person
satisfies the Secretary that his taxable income for that year or any prior year included
the profits out of which that dividend was paid, consequent upon the application of
section 24(2):
Provided that if the person acquired the shares by inheritance, then this provision shall
also apply equally where the person satisfies the Secretary that in that year or any prior
year the taxable income of the deceased or his estate had included under the profits out
of which that dividend was paid, consequent upon the application of that sub-section.
3. So much of any dividend derived by any person resident in Tuvalu from any non
resident company as is not exempt pursuant to paragraph (2) of this Part, to the extent
prescribed by the formulae below:
(a) where the company distributing the dividends is any company other than
an approved fund:
(i) then where: t ≥ r x g
100% of the amount of the dividend; and
(ii) in any other case, the exempt portion of the dividend shall be:
t

r
(b) where the company distributing the dividend is an approved fund:
(i) where: t ≥ g x a
100% of the amount of the dividend
(ii) and in any other case, the exempt portion of the dividend shall be:
t + g x (r – a)
r r

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 Page 111

in which formulae:
a = the rate of income tax applicable to an approved fund resident in
Tuvalu;
g = the gross amount of the dividend which, but for this sub-paragraph
would have been gross income;
r = the rate of income tax applicable to a person resident in Tuvalu (that
rate being expressed as a decimal); and
t = the amount of overseas tax charged on the gross amount of the
dividend (‘g’):
Provided that this exemption shall not apply where the person has made
the election contemplated by the proviso to section 27(4)(a)(ii), and the
exemption is determined pursuant to paragraph 4 of this schedule.
4. Where, within the time allowed by the proviso to section 27(4)(a)(ii), a person
resident in Tuvalu has made the election contemplated by that section in relation to any
dividend derived by that person from a non resident company, so much of that
dividend as is not exempt pursuant to paragraph 2 of this Part shall be exempt to the
extent determined by the formulae below:
(a) where the non-resident company distributing the dividends is a company
other than an approved fund:
(i) then where:
[p – g + t ] ≥ (r x p);
100% of the amount of the dividend shall be exempt; and
(ii) in any other case, the exempt portion of the dividend shall be the
amount represented by the formula:
[p – g + t
] – (p – g); and
r
(b) where the company distributing the dividend is an approved fund:
(i) then where:
[p – g + t] ≥ p x a
100% of the amount of the dividend; and
(ii) In any other case, the exempt portion of the dividend shall be:
[p – g + t
] – [(p x a/r) – g] r
in which formulae:
a = the rate of income tax applicable to an approved fund resident in
Tuvalu;

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g = the gross amount of the dividend which, but for this subparagraph
would have been gross income;
p = the amount of profit earned by the company which, after the deduction
of attributable foreign income tax, would have left an amount equal
to item ‘g’ in the relevant formula;
r = the rate of income tax applicable to a person resident in Tuvalu (that
rate being expressed as a decimal);
t = and the amount of overseas tax charged on the gross amount of the
dividend (‘9’),
and in relation to any determination pursuant to this paragraph:
(c) the intent is that there should be no economic double taxation of the
profits of the company distributing the dividend, having regard to:
(i) the overseas tax to which that non resident company was itself
liable directly or indirectly in relation to its profits which funded the
dividend; and
(ii) the incidence of Tuvalu income tax on the dividend in the hands of
the person deriving that dividend;
(d) in any case where the person deriving the dividend can demonstrate to the
satisfaction of the Secretary that, having regard to the intent stated in sub-
paragraph (c), the formulae in this paragraph result in significant prejudice
to that person, the Secretary may determine what adjustments should be
made to the formulae to meet the needs of the case, and those adjusted
formulae shall apply accordingly; and
(e) where the dividend derived by the person has any underlying tax, credits
attached, subject to sub-paragraph (d), these shall provide the indicia as to
the amount of attributable overseas tax for the purposes of item ‘p’ in the
formulae.
5. The amount of any dividend to the extent it comprises the nominal value of any
bonus shares, where the date upon which that dividend was derived (as contemplated
by the definition of that term in section 2) is more than 5 years after that person
acquired those shares:
Provided that if the bonus shares were acquired by inheritance, then the acquirer shall
be deemed to have acquired those shares on the date upon which the deceased acquired
(or was deemed to have acquired) those shares.
PART 4: Governmental
1. The income of the regional organizations listed below and the income derived from
the funds of such organisation by persons employed thereby:
(a) South Pacific Commission; and

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(b) Forum Secretariat.
2. The income of the Tuvalu Trust Fund set up by international treaty entitled the
Agreement concerning an International Trust Fund of Tuvalu.
3. Income derived by the Crown or any statutory corporation:
Provided that this exemption shall not apply where and to the extent that the Minister
(on the advice of Cabinet) from time to time so determines by regulation.

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Schedule 2
ALLOWABLE DEPRECIATION
[Section 13(1)] 1. In respect of any capital asset acquired and held by any person, there shall be
calculated depreciation in accordance with this Schedule.
2. Any depreciation will be calculated by that person —
(a) in the year of acquisition, on the cost price to him of the capital asset; and
(b) in subsequent years, on the income tax value of that capital asset at the
commencement of the relevant year.
3. Subject to this schedule and Schedule 8, the rate of depreciation shall be:
% Rate per month % Rate per annum
(a) Buildings (but not the land or other
appurtenances on the land) 1.5% 18%
(b) Ships 1.5% 18%
(c) Plant, machinery, equipment, (not
being motor vehicles) 2% 24%
(d) Fixtures and fittings 2% 24%
(e) Motor vehicles 2% 24%
(f) Capital assets in respect of which a
rate is determined by regulation As determined by regulation
(g) Other capital assets 0% 0%

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4. Notwithstanding the provisions of paragraphs (2) and (3), depreciation calculated
may only be claimed as a deductible cost, being an amount which is deemed to be
expenditure incurred pursuant to section 13, where and to the extent that:
(a) the depreciation relates to a month in which the capital asset was used
either;
(i) in the production or gaining of gross income; or
(ii) in the conduct of a business for the production of gaining of gross
income; and
(b) the deductibility of that deemed expenditure is not debarred by any
provision of the Act.
5. Where at any time any capital asset is disposed of, or will no longer be used as
contemplated by paragraph (4) then:
(a) in any case where the capital assets is:
(i) retained for purposes or use other than as contemplated by
paragraph (4);
(ii) disposed of for inadequate consideration; or
(iii) a disposal to a related person;
the month value of capital asset at that time; and
(b) in any case, the net proceeds of disposal of that capital asset,
shall be compared with the income tax value of that asset at the time, and (subject to
this Schedule):
(c) any excess of the income tax value over that market value or those net
proceeds of disposal (as the case may be) shall be treated as depreciation
to which section 13(1) applies; and
(d) any excess of that market value or those net proceeds of disposal (as the
case may be) shall be treated as gross income (but only insofar as, on a
pro rata basis, they may be viewed as a recovery of an amount which had
constituted a deductible cost in the current or any previous year).
6. If, in applying paragraph 5:
(a) there is a shortfall between the income tax value of a capital asset and its
proceeds of disposal (or market value, as appropriate); and
(b) the Taxation Officer, in his best judgement objectively exercised, consider
that a significant portion of that shortfall is attributable to factors other
than wear and tear and any force majeure affecting that capital asset;
he may determine that the portion so attributable shall not be treated as a deductible
cost.

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Schedule 3
INVESTMENT ALLOWANCES
[Section 13(2)] [No incentive allowances currently in force]

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Schedule 4
PERSONS WHOSE GROSS INCOME FROM SPECIFIED SOURCES IS TO
BE DETERMINED AS A SPECIFIED PERCENTAGE OF THROUGHPUT.
[Section 20] PART A:
1. For the purposes of sections 9(1) and 37, and of Schedule 5, the value of throughput
in relation to the classes of business set out in paragraph 2 of this Part shall be
determined at the specified percentage of the indicated throughput of that business in
that year.
2. The classes of business to which this Part applies are:
Class of business Throughput basis
Specified
percentage of
throughput
(a) Supply of petroleum and allied
products to or within Tuvalu by any
non resident or by any entity under
the control of a non resident Value of turnover 10%
(b) Carriage of passengers and goods
by air or sea from Tuvalu by a non
resident or by any entity under the
control of a non resident Amounts charged
for carriage 10%
(c) General risk insurance premiums
where the person insured is resident
in Tuvalu, or the risk insured is in
Tuvalu, not being a risk of a private
or domestic nature Premiums derived 10%

PART B:
1. For the purposes of section 9(1), any person who carries on in Tuvalu a business of
the class or classes set out in paragraph 2 of this Part may for any year elect to have the

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taxable income content of their gross income from that business determined at the
specified percentage of the indicated throughput of that business in that year:
Provided that any such election shall only be of effect if it is made in accordance with,
and then subject to, the requirements of section 21.
2. The classes of business to which this Part applies are:
[No determinations yet made]

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 Page 119

Schedule 5
INCOME TAX TO BE WITHHELD OR COLLECTED AT SOURCE
[Section 37] In this Schedule, references to withholding of income tax at source include any
situation where income tax is required to be collected at source.
PART A
The amount of income tax to be withheld at source from any amount of gross income
(not being exempt income) from which, there is a requirement to withhold at source, is
as follows:
% of gross
income
(1) emoluments derived by a person from any income employment in
Tuvalu, whether or not the service are rendered in Tuvalu, and
irrespective of where the contract is made or the emoluments are paid
or provided:
Provided that:
(a) for the purpose of this withholding, the amount or value of any
emolument subject to withholding at source shall be the amount of
the emolument less any contributions withheld or collected by the
employer for payment to any approved fund; and
(b) where the employment to which the emolument relates is the
employee’s principal employment, the amount of tax to be withheld
shall be the amount of tax calculated in terms of this Schedule,
reduced by the amount of $15 for each completed week in the period
in respect of which the emoluments are payable;
(2) non resident withholding income comprising:
(a) dividend
(b) service fees
(c) specified alimony payments
(d) gross income other than dividends, service fees or specified
alimony payments; 30%

15%
15%
30%

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Provided that where the non resident withholding income is payable
to a resident of a country with which Tuvalu has a tax treaty in effect,
the rates here specified shall be reduced as necessary to any
maximum applicable rate prescribed in the treaty; 15%

(3) any amount payable by any person to a resident by way of
specified alimony payments; and 30%
(4) any amount (not being amounts covered by the preceding items
on this schedule or amounts which are exempt income) paid or
credited to a non resident in respect of work performed in Tuvalu by
the non resident or an employee or representative of a non resident. 40%

PART B
(1) The amount required to be withheld at source by:
(a) any person carrying on business in Tuvalu who makes any payment to any
person in respect of supplies of the type specified in Schedule 4; or
(b) any person in Tuvalu who, for or on behalf of any business carried on in
Tuvalu, directly or indirectly makes any payment to any other person in
respect of supplies of the type specified in Schedule 4, (whether or not
that person acquires ownership or title to the items supplied),
shall be as set out below, in each case the percentage being applied to the deemed
amount of gross income (being the value of throughput determined in accordance with
Schedule 4):

Class of business % of amount of value of
throughput (as defined by
section 2)
(i) supply of petroleum and allied products to or
within Tuvalu by any non resident or by any entity
under the control of a non resident; 10%
(ii) carriage of passengers and goods by air or sea
from Tuvalu by a non resident or by any entity under
the control of a non resident; and 10%

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 Page 121

(iii) general risk insurance premiums where the
person insured is resident in Tuvalu, or the risk is in
Tuvalu, not being a risk of a private or domestic
nature: 10%

Provided that no amount shall be required to be withheld where the Secretary confirms
in writing to the payer that the amounts payable to the supplier are for any reason
(including the provisions of any tax treaty in force) exempt income.

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Schedule 6
APPLICABLE INCOME TAX RATES AND REBATES FROM INCOME TAX
[Section 5] 1. In relation to any person in any year, income tax shall be payable at the rates set out
below in respect of that person’s taxable income for that year:
% of taxable income
(a) Taxable income of a resident individual in their
personal capacity 30%
(b) Taxable income of any executor, administrator or
trustee in their capacity as such in relation to any one
trust or estate in Tuvalu 30%
(c) Taxable income of any approved fund resident in
Tuvalu 15%
(d) Taxable income of a resident local authority or
trade union 30%
(e) Taxable income of any resident religious,
educational, cultural, or charitable organisation 30%
(f) Taxable income of National Bank of Tuvalu 40%
(g) Taxable income of any resident company (other
than those specified elsewhere on this schedule) 30%
(h) Taxable income of any resident company 40%
2. From the amount of tax calculated in relation to the
taxable income of any person who is an individual,
there shall be deducted for each completed week in the Amount

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year (not exceeding 52 in aggregate) for which the
person was a taxpayer a rebate of:
$15
Provided that:
(a) this rebate shall not be available to any person in
their capacity as executor, administrator or trustee of
any deceased estate, or the trustee of any other trust;
b) the purpose of the rebate is that for any person who
is a resident individual, who is entitled to the rebate in
relation to any year, a zero rate of income tax applies to
so much of that person’s taxable income as does not
exceed the specified level of taxable income (as
defined in section 2); and
(c) where the individual is non resident, the rebate:
(i) shall be increased by one third; and
(ii) shall only be available in relation to completed
weeks of presence in Tuvalu.
3. This schedule has no application to the gross income
of any person where that gross income constitutes non
resident withholding income the income tax liability in
respect of which ultimately is determinable solely with
reference to the amount of income tax withheld or
collected at source

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Schedule 7
PRESCRIBED RATES OF INTEREST
[Section 58] 1. Where, pursuant to any provision of this Act, interest is required to be paid by any
person on any amount of income tax due to the Crown and unpaid by the final date for
payment, the prescribed rate shall be:
(a) 1% for each month or part thereof from after the final date for payment
during which the amount of income tax remains unpaid.
2. Where, pursuant to any provision of this Act, interest is required to be paid to any
person on any amount of income tax refund due by the Crown, the prescribed rate
shall be:
(a) 1 % for each month or part thereof for which the amount of income tax
remains unpaid after the date from which, in accordance with the Act,
interest is taken to run.

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Schedule 8
TRANSITIONAL PROVISIONS
[Section 88] Notwithstanding the provisions of paragraph (3) of Schedule 2, where in relation to any
capital asset held by any person in any year and either:
(a) acquired by him prior to 1 April 1992; or
(b) acquired pursuant to a binding contract entered into before 1 April 1992;
and the amount of depreciation claimable by that person under the
provisions of the Income Tax Act, Cap 52 is greater than that which
would be claimable pursuant to this Schedule, that person may elect that
in relation to that capital asset, the depreciation entitlement be determined
as if the Income Tax Act, Cap 52 were still in force:
Provided that —
(c) any such election shall be made with the person’s return of income for the
1993 year;
(d) once such an election is made in relation to any capital asset, that election
shall remain in force for so long as the capital asset is retained by that
person; and
(e) if that capital asset is subsequently acquired by any related person, that
election shall be binding on, and govern depreciation claims by, that
related person.
Any exemption from income tax conferred under Schedule 1 to the Income Tax Act,
Cap 52 and in force at 31 December 1992 shall remain in force and of effect under this
Act, but only insofar as:
(a) that exemption is not inconsistent with the provisions of this Act; and
(b) that exemption has not been modified or withdrawn by regulation:
Provided that —
(c) this paragraph specifically shall not apply to the exemptions conferred by
the following paragraphs of Schedule 1 to the Income Tax Act, Cap 52:
(i) paragraph 6 (in relation to the income of an approved pension
fund);
(ii) paragraph 9 (in relation to the income of any registered cooperative
society); and

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(iii) paragraph 18 (in relation to the income arising from the sale of
copra cut within Tuvalu); and
(d) this paragraph specifically shall not apply to the exemption conferred by
paragraph 8 of Schedule 1 to the Income Tax Ordinance 1982 (in relation
to the profits derived from a business of air transport carried on in Tuvalu
by a non-resident person who is declared exempt by the Minister), but
only on the coming into force of paragraph 2(b) of Part A of Schedule 4.

Income Tax Act 1992 Endnotes

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 Page 127

ENDNOTES
Table of Legislation History
Legislation Year and No Commencement

Table of Renumbered Provisions
Original Current

Table of Endnote References

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