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Hiring in Timor-leste
Timor Leste, officially known as the Democratic Republic of Timor-Leste, is an Island country in Southeast Asia. Dili is the capital and the largest city. Portuguese is the official language and US Dollar is the official currency. Agriculture is the largest sector of Timor Leste. Timor Leste’s main trading partners are Singapore, Indonesia, Japan, South Korea, China, and India. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Timor Leste’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. Labor Code stipulates that employees are entitled to 12 days of annual leave. Residents are taxed on their worldwide income; non-residents are taxed on their Timor Leste-source income only. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Timor Leste’s Labor Code and tax laws.
statutory labor requirements
Probation Period
- Maximum length of probationary period is 1 month
Annual Leave
- The period of vacation shall not be less than 12 working days.
Public Holidays
- New Year's Day (1st January)
- Ash Wednesday (26th February)
- Good Friday (10th April)
- Labor Day (1st May)
- Independence Restoration Day (20th May)
- Eid al-Fitr
- Corpus Christi (11th June)
- Eid al-Adha
- Popular Consultation Day (30th August)
- All Saints' Day (1st November)
- All Souls Day (2nd November)
- National Youth Day (12th November)
- Proclamation of Independence Day (28th November)
- National Heroes Day (in East Timor) (7th December)
- Feast of the Immaculate Conception (8th December)
- Christmas Day (25th December)
- National Heroes Day (31st December)
Maternity Leave
- Female workers shall have the right to paid maternity leave for the minimum period of 12 weeks, 10 weeks of which shall necessarily be taken after delivery, without loss of remuneration and seniority rights.
Paternity Leave
- Male workers shall have the right to a five-day remunerated paternity leave after the birth of their children without losing the right to seniority.
Work Hours
- The standard work week is of 8 hours per day for 6 days
Overtime
- Work provided overtime shall be remunerated with normal hourly remuneration added by 50 per cent.
- Work provided on a weekly rest day or on a mandatory holiday shall be remunerated on the basis of normal hourly remuneration added by 100 per cent.
Notice Period
- The notice period is 15 days if the worker has worked less than 2 years
- The notice period is 30 days if the worker has worked more than 2 years
- The worker may also terminate the employment contract, irrespective of good cause, through written communication sent to the employer with a minimum of 30 days’ advance notice.
income tax
- Timor-Leste residents are taxable on a worldwide income basis, while non-residents are taxable only on the income sourced from Timor-Leste.
- Residents earning foreign-sourced income may receive a foreign tax credit
- Timor-Leste individual taxpayers are subject to income tax on their taxable income, which is essentially the difference between gross income (other than from employment, see Wage Income Tax [WIT] below) and allowable deductions.
- The income tax rate for taxable income earned by a non-resident individual is 10% (flat rate) for all Timor-Leste sourced taxable income.
- The income tax rates applicable for a resident individual taxpayer are as follows:
|
Annual taxable income (USD) |
Income tax rate (%) |
|
|
Over |
Not over |
|
|
0 |
6,000 |
0 |
|
6,000 |
10 |
|
deductible expenses
- There are no personal deductions covered in Timor-Leste.
immigration
- Ordinary Visa Class I is designed for foreigners who travel to the national territory for tourism or business, it allows a maximum length of stay of 90 days and is valid for up to one year with one or multiple entries.
- The Work Permit (or Work Visa) allows the holder to enter Timor-Leste to work temporarily, paid or unpaid, as an employee, independent worker or professional.
- The applicant must
-
- Demonstrate the purpose of work, by producing the necessary documents and statements, namely: Employment offer, or
- Interests in a company, or
- Professional competence for performing an independent profession, or
- Any other document related to the intended activity.
- Demonstrate means of subsistence.
- Demonstrate accommodation arrangements.
- Demonstrate that (s)he does not have a criminal or police record.
- Demonstrate that (s)he is physically and psychologically fit.
- Hold a return ticket, or show ability to fund own departure.
- Demonstrate the purpose of work, by producing the necessary documents and statements, namely: Employment offer, or
|
Type of Visa/ Permit |
Documentation |
Validity |
Eligibility |
|
Ordinary Visa Class I |
|
90 days |
|
|
Work Permit |
|
1 year |
|
value added tax
- There are no consumption or similar taxes that impact individuals in Timor-Leste.
withholding tax
Dividends
- Timor Leste source dividends paid to nonresidents are subject to a 10% withholding tax
Interest
- Interest paid to a nonresident is not subject to withholding tax
Royalties
- A 10% withholding tax applies on royalties paid to residents and nonresidents
|
Type of Payment |
Residents |
Nonresidents |
||
|
Company |
Individual |
Company |
Individual |
|
|
Dividends |
0% |
0% |
10% |
10% |
|
Interest |
0% |
0% |
0% |
0% |
|
Royalties |
10% |
10% |
10% |
10% |
|
Fees for technical services |
0% |
0% |
0% |
0% |
termination
The employment contract may be terminated by:
-
- Expiry
- Agreement between the parties
- Rescission at the initiative of the worker
- Rescission at the initiative of the employer based on good cause
- Rescission due to market, technological or structural reasons relating to the company of business.
- The employer and the worker may terminate the employment contract by mutual agreement, which should be concluded in writing and signed by both parties, containing the terms under which the termination takes place, the date of such agreement, the beginning of its entry into force, as well as the compensation to be paid to the worker, if any.
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, and severance pay
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Probationary Period |
|
Annual Leave |
|
Public Holidays |
|
Maternity Leave |
|
Paternity Leave |
|
Sick Leave |
|
Overtime Pay |
|
Notice Period |
|
Severance Pay |
|
Social Security Benefits |
payments and invoicing
- An individual who derives income from business activities is required to lodge an Annual Income Tax Return by the 15th day of the third month of the following year.
- An individual who receives income only from wages that have been correctly subject to WIT is not required to submit an Annual Income Tax Return.
- An individual who is required to settle income tax is required to do so by the 15th day of the third month of the following year.
ease of doing business
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Timor Leste ranked 181st in the World in 2019 in terms of ease of doing business.
employee accruals
| Christmas Bonus% |
0% |
| Christmas Bonus Over Vacations % |
0% |
| Severance per Year % |
N/A |
| Vacations % | Employees are entitled to 12 days of annual leave (3.29% of annual salary) |
| Notice % |
Employees are entitled to 15 days of notice period (4.1% of annual salary) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% |
0%
|
|
Total percentage of Salary (yearly)
|
The total employment accruals as a percentage of salary per anum are equal to 7.4%
|
employer accruals
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | The period of vacation shall not be less than 12 working days. | This equals 3.28% (12/365 days) of annual income |
| Maternity Leave | Female workers shall have the right to paid maternity leave for the minimum period of 12 weeks, 10 weeks of which shall necessarily be taken after delivery, without loss of remuneration and seniority rights. | This equals 23% (12/52 weeks) of annual income |
| Paternity Leave | Male workers shall have the right to a five-day remunerated paternity leave after the birth of their children without losing the right to seniority. | This equals 1.36% (5/365 days) of annual income |
