Principal taxes
The following are the principal taxes:
- Taxes on income and gains
- Transactions Taxes
- General Consumption Tax (GCT or VAT)
- Transfer Tax
- Customs Duties
- Stamp Duties
- Taxes on Property
- Land /Property tax
- Asset tax
- Payroll Taxes
- P.A.Y.E. (Pay as you earn) (Income Tax)
- National Insurance Contributions (NIS or social security)
- National Housing Trust (NHT)
- Education Tax (Ed. Tax)
- Human Employment and Resource Training (HEART) contributions.
- Other Taxes
- Annual company registration fees
- Stamp duties
- Motor vehicle licence tax
- Travel tax.
Individuals
Every individual with taxable income exceeding J$169,104 from 1 July 2005 and $193,440 from 1 January 2006 ($120,432 for 2004) is required to file an Income Tax Return. For employees, income tax is deducted under the PAYE system and paid monthly to the tax authorities. Taxpayers whose incomes consist solely of employment earnings are not normally required to file regular annual returns.
Capital taxation
There are no taxes on capital or wealth in Jamaica. However, a transfer tax of 7.5% is payable on the transfer of certain assets, e.g. land and buildings.
Corporations
A corporation resident in Jamaica is subject to income tax on its worldwide income. A non-resident corporation is subject to income tax if it carries on a trade in Jamaica, or has an office or place of business in Jamaica, or derives income from any source in Jamaica.
The income of certain organizations is specifically exempted from income tax. These include pension and superannuation funds approved by the Commissioner, and charitable organizations.
Income tax rate for corporations
Corporations pay income tax on their net income at the flat rate of 33 1/3%. Non trading income, e.g. interest, is, however, generally taxed on the receipts basis.
Dividends and capital gains
Dividends paid out of profits by a Jamaican corporation whose shares are quoted on the Jamaica Stock Exchange are not taxed. Dividends paid by an unlisted company are taxed at the rate of 33 1/3% if paid to corporations (25% for payments to individuals). Where payment of the dividend is made to a foreign investor and there is a treaty in effect between Jamaica and the payee country, the lower treaty rates may apply.
Intercompany charges
Payments to foreign affiliates for management fees, research and development, and general and administrative expenses, are deductible for income tax purposes, provided they are made at arm's length rates in consideration of the services rendered.
Losses
Net operating losses incurred for a particular year of assessment may be carried forward indefinitely until fully utilised. Losses cannot be carried back. There is no provision for the utilisation of group losses.
Permanent establishments
Foreign companies which are deemed to have a "Permanent Establishment" (a term normally defined by the relevant Treaty) in Jamaica may be subject to income or withholding tax here. If the Permanent Establishment is a place of business in Jamaica, that is, an office or other location from which it carries on its business activities, local law requires the registration of a branch. A separate legal entity may, instead, be registered. Various other registrations may also be required.
Branch operations
A branch operation irrespective of the nature of its business activities, is subject to Jamaican tax on income derived from the island and elsewhere to the extent remitted to the island. Transactions between the branch, its head office and affiliates should be at arm's length values.
Dividends, interest, royalties
Dividends, interest and royalties from Jamaican sources to a foreign corporation are subject to income tax at the rate of 331/3% or lower treaty rate.
Service/management fees and rentals
Service fees/management fees and rentals from Jamaican sources to a foreign corporation are subject to income tax at the rate of 33 1/3% or lower treaty rate.
General Consumption Tax (GCT or VAT)
GCT is a tax on value added, which is essentially borne by the final consumer. Effectively, the tax is collected in stages throughout the production and distribution cycle.
In computing the tax which is payable to the Revenue, the taxpayer deducts the tax paid by him on the purchase of goods and services (input tax) from the tax which he charges his customers on the sale of goods and services (output tax).
GCT is charged on the supply in Jamaica of goods and services by a registered taxpayer, and on the importation of goods and services into the country.
The standard rate of GCT is 15%. Some goods and services are not subject to GCT by virtue of their exempt status. Others, though taxable, are taxed at a rate of 0% (zero-rated).
GCT can be charged only by registered taxpayers. A registered taxpayer is one that is engaged in a taxable activity and has total annual turnover exceeding a threshold of J$144,000.
Transfer tax
The Transfer Tax Act 1971 provides for tax at the rate of 7.5 percent of the consideration of each transfer, limited to 37.5 percent of the capital gain. The tax is payable on certain classes of property situated in Jamaica. Such property comprises land and buildings, leases of land, securities of a company, and beneficial interests under any settlement on these types of property. The tax is imposed on the transferor and is paid by the purchaser, who deducts it from the consideration for the transfer. Transactions on the Jamaica Stock Exchange are exempt from the tax.
Payroll taxes
National insurance contributions
Employees are required to be insured under a state-administered program of social security insurance.
National Housing Trust contributions
Contributions are made by employers and employees on all salaries and wages, including bonuses and commissions paid for employment in Jamaica. Expatriate employees are, on application, entitled to a refund of their contributions when they leave the island permanently.
Education tax
Education tax is charged on the same basis as the contributions to the National Housing Trust. Only the employer's contributions are tax deductible.
Human Employment and Resource Training contributions
The Human Employment and Resource Training (HEART) contributions are payable monthly by employers only on the wage bill at the rate of 3 percent. The contributions are tax deductible.
Other indirect taxes
There are several other indirect taxes that are levied on certain activities or are applicable to certain industries. These include:
Hotel accommodation tax
Construction operations levy
Import duty
Stamp taxes
Document tax
Stamp tax on authorized share capital
Partnerships and Joint ventures
A partnership is treated as a conduit and as such is not subject to income tax. Partners, corporate or individual, are taxed on their own share of the partnership income.
Taxation of foreign partners
Non-resident partners, including corporate partners, are subject to Jamaican tax on their share of the partnership profits that accrue in or are derived from Jamaica. In the absence of a definition provided by a relevant double tax convention, income is usually deemed to be derived from Jamaica, if the activity is carried on within the island or if the partnership is managed and controlled from the island. Non-resident foreign corporations pay tax on their share of profits at the same rates as resident corporations. Non-resident individual partners are taxed at the same rates as non-resident individuals. Double taxation relief may be available under the relevant treaty.
Joint ventures
A Joint venture, i.e., an association of persons established for a specific task (usually of limited duration) is generally treated as a partnership and taxed in the same way as discussed above.
Double taxation agreements (treaties)
The government's policy is to negotiate treaties with those countries that carry on significant trade with Jamaica and are also likely to provide significant investment in the island.
The government uses tax treaties primarily to promote capital inflow and expand foreign trade. By the treaty mechanism, it seeks to ensure as far as possible that the tax burden in Jamaica will be no greater than in the foreign investor's country of residence. It also tries to ensure that tax-sparing provisions are used to recognize special tax incentives granted to promote investment in the island.
Jamaica has treaties with 12 countries including The United States.
