| Covenants |
| A covenant
is a legally binding agreement between two or more parties. Such parties
may include individuals, companies, charities or benevolent organisations.
The duration of the covenant must be for a period of not less than three
years and the terms of the settlement must not be capable of being modified
or revoked during that period. |
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| All covenants
must first be registered with the Registrar of Corporate Affairs Intellectual
Property office or the Registration Department where they are stamped
and adjudicated.This process includes the payment of stamp duty. |
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| The Deed
of Covenant along with two (2) copies thereof must be submitted to the
Inland Revenue Department for approval and registration. |
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| A covenant
may be made with a minor, but the minor must not be the child of the settlor. |
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| There
is no age limit for incapacitated individuals with whom covenants are
made. However a medical certificate is required to substantiate the claim
of incapacity. |
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| Where
the covenant is made with a non-resident then the covenantor is required
to withhold and remit twenty percent as tax and pay it in to the Commissioner
as a pre-payment of tax for the non-resident. |
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| Deductions
in respect of a covenant made with an individual must not exceed five
percent (5%) of the amount that would otherwise form part of the assessable
income of the covenantor. |
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| Where
the covenant is with a charity or a benevolent organisation the covenantor
is allowed to claim ten percent (10%) of the amount that would otherwise
form part of the assessable income of the covenantor.Receipts must be
submitted with all claims. |
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| The charity
or benevolent organisation must be registered with the Inland Revenue
Department as well as the Registrar of Corporate Affairs Intellectual
Property Office |
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| These
notes are not be construed as taking precedence over the law to which
reference should always be made in cases of doubt. |
