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JAMIACA

Table of Contents

ECONOMIC OVERVIEW

Jamaica, the third-largest island in the Caribbean and the largest English-speaking one, spans over 4,200 square miles with a population of around 2.8 million. It was initially colonized by Spain in 1494 before being under British rule for over 300 years until gaining independence in 1962. Today, it stands as a vibrant democracy, home to two major political parties: the Peoples National Party (PNP) and the Jamaica Labour Party (JLP). English is the official language, and the Jamaican dollar (JMD) is its currency. The country is divided into 14 parishes, with Kingston as its capital. Notable cities include Montego Bay, Spanish Town, and Ocho Rios. Despite its size, Jamaica boasts a rich culture and has produced influential figures like Bob Marley, Usain Bolt, and Marcus Garvey. The economy thrives on tourism, manufacturing, agriculture, energy, outsourcing, and bauxite/alumina industries, with significant contributions from remittances. Infrastructure development has been notable, with improved highways, airports, and seaports. Telecommunications has also seen advancements, with sophisticated systems incorporating fixed-line and wireless technologies like 3G and 4G broadband networks.

Personal Income

The Corporate Income Tax in Dominica, as outlined in the Income Tax Act Chapter 67:01, applies to non-individual entities such as companies. These entities are required to pay tax on their gains or profits constituting assessable income. The due date for Corporate Income Tax is every three months, coinciding with the end of the company’s financial year. This requires three quarterly installment payments, with rates of 25%, 35%, and 40% respectively. The tax rate applied to the net profit is 25%. Returns must be filed within three months after the financial year ends, and the company’s financial statement should be included upon filing.


Regarding taxes on personal income in Jamaica, residents and domiciled individuals are typically taxed on their worldwide income, while non-residents are taxed only on income sourced within Jamaica. Non-domiciled individuals usually are not taxed on foreign income unless it is remitted to Jamaica. However, non-domiciled individuals working in Jamaica are taxed on income earned within the country, including Jamaican-sourced income.


For personal income tax rates, individuals are generally subject to a 25% tax rate on chargeable income up to JMD 6 million annually, with an annual tax-free threshold available where applicable. Chargeable income exceeding JMD 6 million annually is taxed at a rate of 30%. Jamaican tax resident individuals have access to an annual tax-free threshold of JMD 1.5 million. Regarding local income taxes, taxation on individuals is primarily at the national level, and there is not a separate income tax imposed at the local level.

Individual Residence

Individuals can be considered residents in Jamaica for a tax year (which follows the calendar year) if they meet any of the following conditions: They spend at least six months in Jamaica during the tax year or visit with the intention of establishing tax residency and actually do so. They or their spouses have a place of abode available for their use in Jamaica, and they visit the island at any time during the tax year, regardless of the duration of the stay. They habitually visit Jamaica for significant periods. The Commissioner General of Tax Administration Jamaica (TAJ) typically considers periods totaling three months as significant and visits occurring in four consecutive years as habitual.

Other Taxes

NIS

Employers deduct and remit National Insurance Scheme (NIS) contributions, with employees and self-employed individuals contributing at specified rates based on income thresholds. Currently, the contribution rate for employees and employers is 3% each on a maximum remuneration of JMD 1.5 million per annum. Self-employed individuals contribute at a rate of 6% to maximum earnings of JMD 3 million per annum. The income threshold for both employed and self-employed individuals increased to JMD 5 million per annum as of April 1, 2022.

National Housing Trust (NHT)

Employers and employees contribute to the NHT, with different rates for each. Employers contribute at a rate of 3%, while employees contribute at a rate of 2% on all taxable emoluments received from employment in Jamaica. Self-employed individuals also contribute at a rate of 2% of earnings. An employer’s contribution is tax deductible, while that of an employee is not. Employee contributions are refunded after seven years, and employer contributions are not refundable.

Education

Charged at specific rates for employers and employees, deducted after NIS contributions and contributions to approved superannuation schemes. Currently, the rates are 3.5% for employers and 2.25% for employees.

Human Employment and Resource Training (HEART) Contributions

Paid by employers at a fixed rate of 3% of the wage bill and are tax deductible.

Consumption Taxes

General Consumption Tax (GCT) is a value-added tax with a standard rate of 15%. Special Consumption Tax (SCT) is imposed on specific goods like petroleum products, alcoholic drinks, and motor vehicles.

Property Tax

Levied based on the value of land, with rates ranging from 0.50% to 0.90% according to various value bands.

Transfer Tax

Applicable to the transfer of land, buildings, securities, and shares, with a rate of 2% on the consideration payable or market value in certain instances. Listed securities transferred on the Jamaica Stock Exchange are exempt from transfer tax.

Stamp Duty

Imposed on various legal instruments at varying rates.

Capital gains and investment income

For individual’s resident but not domiciled in Jamaica, taxation applies to investment income from outside Jamaica only when remitted to Jamaica. Regarding capital gains, Jamaica does not impose taxes on them. However, there are transfer taxes on certain asset transfers and stamp duties on the transfer or disposal of shares and real property.

Dividend income

For dividend income, ordinary dividends from Jamaican tax-resident companies to Jamaican tax- resident shareholders are taxed at a rate of 15%, deducted at the source by the distributing company. Tax losses and expenses incurred to earn the dividend cannot offset this income. Preference dividends, considered tax-deductible expenses for the paying company, are taxed at applicable rates (25%/30%) for individual recipients. Non-resident shareholders are subject to income tax at a default rate of 25% unless treaty protection or incentive relief applies.

Interest income

Interest income is subject to a 25% income tax deducted at the source for Jamaican residents by prescribed entities like commercial banks. The interest is taxable at rates of 25%/30%, with a credit for withholding tax. Non-resident individuals receiving interest from resident entities are subject to a 25% withholding tax unless a lower rate applies per tax treaty.

Fines and penalties

Fines, penalties, and interest resulting from tax arrears are not deductible.

Net Operating losses

When claiming tax losses from previous years, the deduction is limited to 50% of the taxpayer’s chargeable income for the current year, before considering any losses carried forward. However, there are exceptions: For the first five years after initiating a new trade, profession, or business. When the taxpayer’s gross revenue from all sources for the relevant tax year is less than JMD 10 million annually.

Taxable period

An individual’s tax liability in Jamaica is typically based on income earned during the calendar year, although approval can be sought from the Commissioner General, TAJ, to file on a fiscal- year basis.

Tax returns

Tax returns are due on March 15 of the year following the assessment year and are self-assessed. Individuals who anticipate tax liability solely from emoluments are exempt from filing returns. Married couples usually file separately, but they can opt for joint assessment by written election. Individual income tax returns must be submitted electronically.

Payment of Tax

Tax payments are made quarterly on March 15, June 15, September 15, and December 15 each tax year. These payments are based on estimated liability or the previous year's actual tax paid. Any remaining tax owed after these instalments are deducted is due on March 15 of the following year, with interest charged on outstanding amounts at a rate of 16.62% per annum. Penalties of up to 50% may also be imposed by TAJ for late or insufficient payments. Income tax (PAYE) is typically deducted from emoluments. However, if withholding is not feasible (e.g., due to non-resident employers), taxpayers must make estimated quarterly tax payments.

Tax assessments and audits

The Commissioner General has the authority to conduct audits on selected tax returns or assess additional tax liability within six years, except in specific cases. Audits may proceed even without prior assessment notices. Assessments may occur if the Commissioner General believes the taxpayer has been undercharged or failed to file a return.

Corporate - Taxes on corporate income

Resident corporations are taxed on all the income they earn globally. However, non-resident companies are only taxed on income they generate within Jamaica. For certain types of income like interest, dividends, royalties, and fees, non-resident corporations have tax withheld at a rate of 33⅓%. If the recipient of these payments is from a country that has a double taxation treaty (DTT) with Jamaica, they might qualify for lower withholding rates.

The General Consumption Tax (GCT)

The General Consumption Tax (GCT) functions as a value-added tax (VAT) on goods and services sold within Jamaica and on imported goods or services. Firms with turnover exceeding JMD 10 million annually must register for GCT. The standard GCT rate is presently 15%, though different rates apply to specific items. For instance, telephone services and handsets are taxed at 25%, while the tourism sector incurs an effective rate of approximately 10%, excluding operators under previous tourism incentives. Importantly, a 5% advance GCT is imposed on commercial imports by registered taxpayers. When services are procured from foreign non- resident suppliers, the recipient is responsible for accounting for GCT. However, they may claim credit under certain circumstances, especially when services are received from overseas affiliates. GCT exemptions include essential food items, prescription drugs, some medical supplies, and select construction, transportation, financial, and insurance services. Zero-rated goods cover certain agricultural inputs, exports, and purchases by diplomatic entities and foreign governments. Entities can apply for GCT group accounting, allowing affiliated businesses to be treated as a single taxpayer for GCT purposes.

Customs duties

Customs duties are charged on the imported goods’ customs value, adhering to World Trade Organization (WTO) customs valuation rules. Rates are outlined in a prescribed Customs Tariff, considering the Common External Tariff agreed upon by CARICOM states. Moreover, an environmental protection levy (EPL) and standards compliance fee (SCF) are levied at 0.5% and 0.3%, respectively, of the imported goods customs value. EPL also applies to 75% of locally manufactured goods sales value, with input tax credits available for EPL paid on imported productive inputs. Additionally, specific goods incur other import levies, such as additional stamp duty (ASD).

Group Taxation

Group taxation is generally not allowed in Jamaica, except for a provision allowing group filing of returns for General Consumption Tax (GCT) purposes.

Transfer Pricing

Regarding transfer pricing, Jamaica has implemented regulations in line with the Organization for Economic Co-operation and Development’s (OECD) guidelines. These rules aim to safeguard the country’s tax base and tackle tax avoidance, particularly concerning transactions between multinational entities. Detailed guidelines ensure that taxpayers calculate their taxable income using a deemed arm’s length price for transactions with connected parties, as determined by prescribed methodologies. Businesses engaging in such transactions must disclose information about connected persons, transaction details, and pricing arrangements through their annual tax returns. Moreover, entities with annual revenues exceeding JMD 500 million must adhere to extensive OECD standard transfer pricing documentation requirements. Additionally, the rules empower tax authorities to classify an unconnected person in a low-tax jurisdiction as connected under specific circumstances.

Corporate - Tax credits and incentives

Jamaica provides tax relief to individuals approved under the following incentive legislation:


The Special Economic Zones (SEZ) Act.
The Urban Renewal (Tax Relief) Act.
The Income Tax Act (Junior Stock Market Companies).
The Income Tax Relief (Large-Scale Projects & Pioneer Industries) Act.
The Bauxite and Alumina Industries (Encouragement) Act.
The Charities Act.

Corporate - Withholding taxes

Withholding tax (WHT) is mandatory on payments made to non-residents and must be remitted to the Tax Administration Jamaica (TAJ), along with the relevant return, within 14 days after the month in which the payment occurs to prevent the imposition of interest and penalties. Approval from TAJ is required in some cases, and the various rates of WHT apply to specific categories of payments.

Substantial holdings refer to situations where resident companies hold 25% or more of the voting rights of the paying Jamaican resident company.

A 15% tax rate is applied on dividends paid by a Jamaican resident company to a resident individual shareholder, irrespective of their shareholding.

Tax is deducted from interest payments made to Jamaican residents if the payment is made by a specified entity and the income is not effectively connected with a Permanent Establishment (PE) in Jamaica. This applies solely to companies with a substantial holding as defined by the treaty and only to residents of treaty member states. The rate may be further reduced if the payment is received by a recognized banking institution under the laws of the relevant state, and if the services are provided outside Jamaica or within Jamaica within a specified period.

A withholding tax rate of 15% is imposed on insurance premiums paid by Jamaican residents to non-residents, with exceptions and protection under tax treaties. Additionally, a 3% withholding tax applies to payments for "specified services" purchased locally above a minimum threshold per invoice. Withholding tax deducted can be offset against the payee’s income tax liability upon filing tax returns.

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