Methodology - Tonga (FY2025/26)

Educational model for the fiscal year 1 July 2025 to 30 June 2026. Not the official PAYE withholding tables, not a tax assessment, not tax advice.

Employee (PAYE)

Personal income tax is an annual progressive schedule on gross employment income with no allowable deductions: 0% to TOP 12,000, 10% to 30,000, 15% to 50,000, 20% to 70,000, and 25% above 70,000. The first TOP 12,000 is tax-free (the 0% band, not a separate allowance). Tax is collected by the employer through PAYE withholding (Income Tax Act 2016, s.76).
National Retirement Benefits Fund (Tonga Retirement Fund): the employee contributes 5% of insurable earnings. There is no statutory numeric cap or floor in the Act, so the contribution applies to the full gross.
Net pay = gross - income tax - the 5% employee retirement contribution.
The employer cost view adds the employer National Retirement Benefits Fund contribution of 7.5% of insurable earnings on top of gross (in addition to the employer remitting the employee 5% share). There is no cap or floor.
Income-tax rates in Tonga are set each fiscal year by Order of the Minister with Cabinet approval (s.5). The schedule used here was effective 1 July 2021 and is current for FY2025/26; treat it as provisional should a new Cabinet Order supersede it.
Out of scope: benefits-in-kind valuation, the National Retirement Benefits Fund First Schedule exemptions (domestic and out-workers, casual workers, members of a complying scheme, non-Tongan subjects covered by an equivalent foreign superannuation scheme, diplomatic personnel), the s.61 foreign-source income exemption, and non-resident treatment.

There are two tracks. Small Business Tax is the default for a sole trader with annual turnover below TOP 100,000. It is charged on gross turnover with no deductions: TOP 100 (turnover up to 10,000), TOP 250 (10,001-30,000), TOP 500 (30,001-50,000), and 2% of turnover (50,001-100,000).
The profit-based income tax applies to professional service providers, to turnover of TOP 100,000 or more, or by election. It runs the individual progressive schedule (0/10/15/20/25% with the TOP 12,000 tax-free band) on net business profit (revenue minus deductible expenses), paid via instalments.
This model picks the regime from turnover: below TOP 100,000 it uses Small Business Tax (expenses are ignored for the tax, but are still netted out of revenue for the take-home figure); at TOP 100,000 or above it uses the profit-based progressive schedule on revenue minus expenses.
Self-employed sole traders are not compulsorily covered by the National Retirement Benefits Fund. They may join as voluntary contributors at levels set by the Board (no statutory fixed rate), so there is no mandatory contribution in this mode and no employer-side cost.
Out of scope: the professional-service-provider classification that forces the profit-based regime regardless of turnover, the election out of Small Business Tax, the 15% consumption tax, and voluntary retirement-fund contributions.