Download Income Tax Act 9 - Amendment 64G

Thursday, November 7th, 2002
Dear Shareholder
Income Tax Act 9 - Amendment 64G – Withholding Tax Mutual Funds
Fortress Fund Managers Limited would like to take this opportunity to inform you of the following
Amendment to the Income Tax Act Cap 73 which takes effect December 1, 2002.
“(1) The manager of a mutual fund which is licensed under the Mutual Funds Act shall, unless the
Commissioner otherwise directs, withhold tax at the rate of 25 per cent from the investment of an
individual who is a resident investor in the mutual fund, where that investment is withdrawn within 5
years of being invested.”*
(2) The tax withheld under subsection (1) shall be paid to the Commissioner within 7 days of being
withheld and shall be accompanied by a return in such form as is approved by the Commissioner.”*
Prior to this, resident individuals were allowed to invest up to $ 10,000 per annum which they could
claim on their income taxes as well as bonus payments up to a limit of $ 7,500 converted into mutual
funds.
The requirement was that the investment be held for 5 years otherwise the tax benefit had to be repaid
to the Inland Revenue. There was no other penalty for early redemption.
The reason given for the amendment was that it was intended to protect the Tax incentive against
abuse, since it was reported that some investors were withdrawing their holdings prior to the five-year
expiry of the obligation to hold the investment. The Commissioner of Inland Revenue also felt that it
was becoming very cumbersome to control.
The Department of Inland Revenue has also issued the following guidelines**:
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New investors should indicate by declaration whether tax concessions would be claimed.
Existing investors should indicate on the redemption form whether tax concessions have
been claimed on the investment. No consideration is to be given to gains and losses on
such investment.
No tax shall be withheld from any amount redeemed in excess of $ 10,000 and/or $ 7,500.
No tax shall be withheld if the amount invested was invested in the year of redemption.
However if an investor has never used the investment to claim for taxes then no withholding tax
will be deducted.
At the moment its practical application to closed end funds such as Fortress Caribbean Property Fund
is unclear since these shares are bought and sold on the stock exchange through a broker.
The directors and staff of Fortress Fund Managers Limited thank you in advance for your patience and
understanding as we work through the practicalities of the Amendment.
Fortress Fund Managers Limited
* Source: Income Tax (Amendment) Act, 2002
** Source: Mutual Fund Withholding Tax Guideline - 2002