WHT is imposed on the following payments by residents to a resident:
|Type of payment||WHT rate (%)||Final/non-final tax|
|Royalties||10||Not final, except where paid to an individual|
|Rent (land and building)||10||Not final, except where paid to an individual|
|Prize and winnings||10||Final|
|Construction/building activities||2||Final *|
|Construction consulting services||4||Final *|
|Air and sea transportation||2.64||Final *|
|Mining and mining support services||4.5||Final *|
* The default position is that such amounts will be a final tax. The income recipient can elect to have these payments for services not subjected to final tax by submitting a notification letter to the Timor-Leste Revenue Service.
Payments of Timor-Leste-source income made by a resident to a non-resident are subject to WHT at 10%. Timor-Leste has entered into a double taxation treaty (DTT) with Portugal (although elements of DTT relief are also embedded in the Timor Sea Treaty [TST], see Taxation of petroleum operations in the Other issues section).
Where WHT is applied as a final tax, the taxed income is not included in the recipients’ taxable income for income tax purposes. Accordingly, expenses incurred in deriving income that is subject to final tax are not deductible for income tax purposes.