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Hiring in Tonga
Tonga, officially known as the Kingdom of Tonga, is a country in Oceania. Nukuʻalofa is the capital and the largest city of Tonga. English and Tongan are the official languages and Paʻanga is the official currency. Agriculture is the largest sector of Tonga. Moreover, Tonga relies on international remittances from residents working abroad. Manufacturing sectors consists of handicrafts. Tonga’s main trading partners are New Zealand, Australia, Hong Kong, Japan, US, Singapore and Fiji. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Tonga’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. The Labor Code stipulates that employees are entitled to 20 days of annual leave. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Tonga’s Labor Code and tax laws.
statutory labor requirements
Probation Period
- All new employees shall be on probation for the first six (6) months of their employment.
Annual Leave
- The minimum prescribed entitlement is 20 working days off after each year of service (except casual and piece-rate workers) or a pro-rated portion for part-time workers.
Public Holidays
- New Year's Day (1st January)
- Good Friday (10th April)
- Easter Monday (13th April)
- Anzac Day (25th April)
- Emancipation Day (of Tonga) (8th June)
- King Tupou VI's Birthday (4th July)
- Birthday of Crown Prince Tupouto'a 'Ulukalala (17th September)
- Tonga National Day (2nd November)
- King Tupou I Day (7th December)
- Christmas Day (25th December)
- Boxing Day (26th December)
Maternity Leave
- In 2010, the Public Service Policy granted female public servants in Tonga up to three months of maternity leave.
Paternity Leave
- Fathers are granted five working days for paternity leave.
Sick Leave
- The minimum entitlement is 10 working days of paid sick leave for every 12 months of continuous service, capped at 10 days (sick leave does not continue to accrue beyond 10 days - unless you want it to).
Work Hours
- The conditions and minimum hours of attendance for employees are 40 hours per week, Monday to Friday.
- The normal working day is from 8:30 am to 4:30 pm with a meal break of one hour.
Overtime
- Overtime is paid at a premium of 1.5 or 2 times the normal rate
Notice Period
- Employees must give advance written notice to the CEO of when they plan to leave.
- The period of notice is 20 working days for all staff.
- The employer shall provide the employee, whose post is abolished and declared redundant, with three (3) month notice of redundancy or payment in lieu.
Severance
- Employers should provide employees with severance pay upon dismissal
13th / 14th Month Pay
- No
- There is no statutory requirement to pay the 13th or the 14th month salary.
- There are other benefits including parental and insurance benefits, but there is no evidence that there monetary benefits are customary.
income tax
- The income tax imposed for a fiscal year shall be computed by applying the rate or rates of tax applicable to the person under the Order to the chargeable income of the person for the year, and any tax credits allowed to the person for the year are subtracted from the resulting amount.
- The chargeable income of a person for a fiscal year shall be the gross income of the person for the year reduced by the total amount of deductions allowed to the person for the year.
- The new income tax rates include 10% tax for salaries between TOP$10,000 – TOP$30,000, 20% from TOP$30,000 – TOP$60,000 and 25% tax for TOP$60,000 or more.
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Income Tax |
|
|
Income |
Rate |
|
$0 – $10,000 |
0% |
|
$10,001 – $30,000 |
10% |
|
$30,001 - $60,000 |
20% |
|
$60,001 - and Over |
25% |
deductible expenses
- Subject to this Act, a person shall be allowed a deduction for
-
- any expenditure to the extent incurred in deriving gross income;
- any balancing allowance under section 32 of the income tax act;
- the cost of trading stock sold as determined under section 41 of the income tax act; and any loss on disposal of a business asset, other than an asset or intangible dealt with, computed as the cost of the asset at the time of disposal reduced by the consideration received on disposal.
- A person shall be allowed a deduction for any interest incurred by the person in a fiscal year to the extent to which the person has used the proceeds or benefit of the debt or other instrument or agreement giving rise to the interest to derive income included in gross income.
- shall be allowed a deduction for a contribution made in a fiscal year to a retirement fund only if — (a) the fund is an approved retirement fund; and (b) the contribution is made in respect of an employee who is a resident individual.
- A person shall be allowed a deduction for a bad debt written off in a fiscal year
|
Deductible Expenses |
|
immigration
- Visitors to Tonga must obtain a visa unless they come from one of the visa exempt countries or countries eligible for visa on arrival.
- Visa applications must be sent to the Principal Immigration Officer in Nuku'alofa.
- All visitors must hold a passport valid for 6 months.
- Some of the main visitor visas are business visa and tourist visa
- An Employment Visa is required for a person or group who wants to work in Tonga, either in the Public Service or Private Sector for any length of time.
|
Type of Visa/Permit |
Documentation |
Validity |
Eligibility |
|
Tourist Visa |
|
30 days |
Foreigners seeking to visit Tonga for tourism purposes must obtain a tourist visa |
|
Business Visa |
|
30 days |
Foreigners seeking to visit Tonga for business purposes must obtain a business visa |
|
Employment Visa |
|
2 years |
Foreigners seeking employment in Tonga must obtain an employment visa |
value added tax
- The standard rate of sales tax in Tonga is 15%
|
VAT |
|
|
Standard Rate |
15% |
withholding tax
- Dividends are subject to 15% withholding tax
- Interests are subject to 15% withholding tax
- Royalties are subject to 15% withholding tax
|
WHT |
|
|
Dividends |
15% |
|
Interest |
15% |
|
Royalties |
15% |
termination
- Employees must give advance written notice to the CEO of when they plan to leave.
- The period of notice is 20 working days for all staff.
- The employer shall provide the employee, whose post is abolished and declared redundant, with three (3) month notice of redundancy or payment in lieu.
- Employers should provide employees with severance pay upon dismissal
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity overtime pay, notice period, and severance pay
- Statutory benefits also include social security benefits
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Statutory Benefits |
|
Probationary Period |
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Annual Leave |
|
Public Holidays |
|
Maternity Leave |
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Paternity Leave |
|
Sick Leave |
|
Overtime Pay |
|
Notice Period |
|
Severance Pay |
|
Social Security Benefits |
payments and invoicing
- A taxpayer shall lodge an income tax return for each fiscal year within 4 months after the end of the year.
- If a taxpayer lodges an income tax return under section 68 for a fiscal year, the Minister shall be treated as having made an assessment of the taxpayer’s chargeable income and income tax payable thereon, or business loss for the year equal to those respective amounts as specified in the return.
- An income tax return lodged under section 68 shall be treated for all purposes of the Act and the Revenue Services Administration Act80 as a notice of the assessment served on the taxpayer by the Minister on the day the return was lodged by the taxpayer.
- Subject to this Act, the income tax payable by a taxpayer for a fiscal year shall be due by the due date for lodging the taxpayer’s income tax return for the 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 Tonga ranked 103rd 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 % |
No statutory severance pay |
| Vacations % | The minimum prescribed entitlement is 20 working days off after each year of service (5.49% of annual salary) |
| Notice % |
No statutory notice pay |
| 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 5.49%
|
employer accruals
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | The minimum prescribed entitlement is 20 working days off after each year of service (except casual and piece-rate workers) or a pro-rated portion for part-time workers | This equals 5.47% (20/365 days) of annual income |
| Maternity Leave | In 2010, the Public Service Policy granted female public servants in Tonga up to three months of maternity leave. | This equals 25% (3/12 months) of annual income |
| Paternity Leave | Fathers are granted five working days for paternity leave. | This equals 1.36% (5/365 days) of annual income |
| Sick Leave | The minimum entitlement is 10 working days of paid sick leave for every 12 months of continuous service, capped at 10 days (sick leave does not continue to accrue beyond 10 days - unless you want it to). | This equals 2.7% (10/365 days) of annual income |
| Overtime | Overtime is paid at a premium of 1.5 or 2 times the normal rate | Subjective |
| Severance | Employers should provide employees with severance pay upon dismissal | Subjective |
