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HONIARA, Solomon Islands (Solomon Star, Feb. 1) – Non-residents providing professional and technical experts in the country will now have to pay more tax than ever when providing services in the country effective March this year.

Yesterday the Minister for Finance and Treasury, Hon Gordon Darcy Lilo announced that the rate of withholding tax on payments made to non-residents for professional services would move from 7.5 per cent to 20 per cent from 1 March 2007.

Mr Lilo said this would see visiting professionals digging deep into their pocket to pay extra tax for the service they provide in the country.

Under the tax law, a professional services payment means any payment for professional or technical services or services of an advisor or consultant on behalf of a person or entity resident in Solomon Islands.

There is no requirement to withhold from reimbursements of traveling or accommodation expenses incurred exclusively in relation to the contract.

‘These services largely rely on the personal labour or intellectual input of the service provider. The rate is being increased to reflect the lower rate of expenses incurred in generating this type of income.

"As withholding taxes are in most cases a final tax liability, it is important that the rate of tax is more closely reflective of the tax that should be paid on this type of income.

"Moving the rate to 20 per cent brings Solomon Islands into line with the rate charged in most countries around the world for these types of taxes," Mr Lilo said

Withholding tax paid in Solomon Islands may be treated as a credit against income tax payable in the non-resident’s home country, depending on those countries’ tax laws.

Tax Commissioner Ronnie Piva told Solomon Star that it is part of the tax reform programme undertaken by the government to increase revenue for the country.

He explained that the increase in tax deduction from visitors might boost revenue collection for the economy.

Mr Piva confirmed that the tax deduction payments would be imposed on non-residents effective in March following the order from the Minister.

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