Under the provisions of the Income Tax (Legal Notice 70 - collection of provisional tax) Regulations, a person making a payment for services is required to withhold 15% provisional tax and pay it to the Commissioner of Inland Revenue (CIR).

These regulations are for the purpose of assisting persons in the payment of tax that may be due on their taxable income at the end of the income year.

It includes payments made to the following persons:

• commission income earners.
• the self employed that earn income from certain trades, professions or vocations.
• persons that provide services to another person under a “contract for services”.

Some examples are:

• agricultural, maintenance, development or other work on farming or agricultural land
• forestry or bush work
• grass cutting, weed cleaning around streets or residential areas
• theatrical, stage, concert or radio presentations including hotel or night club performances
• literary contributions or photographs to newspapers
• boat and shipbuilding
• building and labor contracts including maintenance painting plumbing and repairing
• delivery, freight and cartage.

A contract of service includes any agreement (verbal or written) where both parties agree that a certain sum will be paid upon completion of a certain job.

The Commissioner may make arrangements for any particular class of persons, which may include installment deductions at source and may also nominate the person to make the deductions and account for it.

The tax to be deducted by the payee is 15% of the gross payment.

There are two instances under which the tax can be reduced or exempted:

• the payee may request the Commissioner to make some other determination; if the CIR considers that a lower rate of tax is justified then he is required to advise the payer of the amount to be deducted.
• the Commissioner may issue a certificate of exemption from the deduction of provisional tax.