• How much is Payroll Tax?
• Who is a Class 1 Employer or Class 1 self-employed person?
• Who is a Class 2 Employer or Class 2 self-employed person?
• How does payroll tax work?
• What if I work for more than one employer?
• How are payroll taxes paid?
• What documents do you need to submit with your tax?
• What happens if you don't pay your tax?

How much is Payroll Tax?

The first $10,000 of your annual salary is exempt or free from tax.  That means that for the first $10,000 you get paid for the year, you don’t have to pay any tax on it.

Payroll taxes are paid according to the following rates:

For a Class 1 employer and a Class 1 self-employed person, payroll tax is at a rate of 10% of employee’s annual salary after exemption.  That 10% combines 8% from the employee and a 2% match from the employer.

For a Class 2 employer and a Class 2 self-employed person, payroll tax is at a rate of 14% of the employee’s annual salary after exemption.  That 14% combines 8% from the employee and a 6% match from the employer.

Who is a Class 1 Employer or a Class 1 self-employed person?

An employer or self-employed person must meet all the following criteria for the financial year, 1 January to 31 December, to be classified as Class 1:

• Have seven or less different employees for the year; 
• Have gross receipts of $300,000 or less; and
• Have a payroll of $150,000 or less.

It is important to note that any time during the year, if you fail to meet the criteria for Class 1, you will automatically be classified as Class 2.  For example, if you hired four people for the first three months of the year and rehired the same four people for the last three months of the year, you will still have hired less than seven employees during the financial year.  If you also met the other two criteria, you will remain as Class 1.  If, however, you met the other two criteria, but hired four people during the first three months of the year and hired four different people for the last three months, you will have hired eight employees and will automatically be classified as Class 2.

Who is a Class 2 Employer or Class 2 self-employed person?

An employer or a self-employed person, who does not qualify as Class 1 because of failure to meet one or all of the three criteria, is automatically classified as Class 2.

What if I work for more than one employer?

If you work for more than one employer, the one that you have worked for the longest will be considered your primary employer and the other employer will be considered your secondary employer.  Only your primary employer will qualify you for your $10,000 tax exemption.   Let’s say you started working for the Financial Services Commission (FSC, your secondary employer Bobby’s will not be able to factor in your exemption when deducting your taxes from your salary.

How are payroll taxes paid?

If you are a business owner or a self-employed person operating in the BVI, you must register for a Payroll Tax Account with the Commissioner of Inland Revenue.  You must register at the following locations: 

• Inland Revenue Department at the Central Administration Complex on Tortola.
• Inland Revenue Department at the Vanterpool Administration Complex on Virgin Gorda.
• District Office if you live in Anegada (third Wednesday each month) or Jost Van Dyke (third Friday of each month).

Employers are required by law to deduct the amount of tax that you are required to pay from your salary and give it to the Government.  Deductions must be made for equal amounts for each payment period.  If an employer has failed to make the required tax deduction from an employee’s salary, that employer will still be responsible for paying the tax to Government, both the employee’s 8% and the employer’s 2% or 6% match.   The employer, however, cannot make tax retroactive by going back and deducting it from an employee’s salary later.  The law does not make provision for recovery of taxes from an employee by an employer.  The law, though, provides for recovery of taxes from an employer by the Government.

You (if self-employed) or your employer must file your monthly tax return and pay your tax within 21 days of the end of each month.    For an annual payroll tax return, you (if self-employed) or your employer must file your annual tax return and pay your tax by 30 April of the following year for which you are filing. 

What documents do you need to submit with your tax?

Tax return forms to be completed and submitted with your tax are available at the Inland Revenue Department.  You must also submit a financial statement with your tax return and tax.  If you fail to provide the information or if you provide false information, you commit an offence and may be fined and/or imprisoned.

What happens if you don’t pay your tax?

If the tax is filed after the date it is due, there is a penalty of $50 or 5% of the taxable income, whichever is greater, and a further 1% of the tax payable for each month or part of the month during which failure to file continues.  In addition to the penalty, tax not paid by the due date is charged interest of 4% per annum until it is paid up.

If you fail to pay your taxes, you may be convicted and may be fined and/or imprisoned.