Jamaica: Income Tax Return for Self-Employed
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Income Tax Return for Self-Employed
Filing Guide
Filing Income Tax returns Individuals are required to file Income Tax Return - IT01 which include: Self-employed Employed persons with other income (including pensioners) Partners (showing share of partnership profits) - IT01 & IT03 Provided income from all sources in any year of assessment exceeds the tax free income (threshold) of $796,536. (Year of Assesment 2016) Individuals are required to file a tax return by March 15: A final income tax return for the previous year (IT01) An estimated income tax return for the current year - (ITO7) NB. A partnership is not taxable, but a partnership return (IT03) should be filed showing the partnership income and its distribution. Each partner’s return must include the share of the partnership profit. All returns filed for each partner should have a Taxpayer Registration Number (TRN).
Income Tax Payments The previous year’s tax liabilities should be paid by March 15 and estimated tax paid quarterly by March 15, June 15, September15 and December 15.
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Income Tax Return for Self-Employed
Filing Guide
Income Sources Income includes profit or gain from business, trade, profession, vocation, rent, interest, dividends, farming, etc. Examples of sources of income: • • • • •
Sale of goods Fees received from rendering services/subcontracts Farming Mini-bus/taxi service Rent
Examples of Professionals(operating in private practice) • • • •
Doctors Lawyers Accountants & Engineers
Deductions Allowed • • • • • •
Wages and salaries for staff Rental paid for business premises. Interest paid towards bank loans/overdrafts used for business purposes. Insurance-fire/theft. Transportation expense. Other expenses incurred in the production of business income.
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Income Tax Return for Self-Employed
Filing Guide
Deductions Not Allowed • • • •
Private/domestic expenses Capital expenses Depreciation (See section below on Capital Allowances)
Capital Allowances Businesses and Individuals can claim tax allowances, on certain assets acquired and used in earning their income. These allowances are given for income tax purposes instead of depreciation and for the wear and tear of particular assets. This means you can deduct a portion of the cost from your taxable profit and reduce your tax obligations. There are five (5) types of Capital Allowances: 1. Investment Allowances: This is given in place of an Initial Allowance to some types of expenditure. 2. Initial Allowances: This is given for one year only, the year of purchase. 3. Annual Allowances: Is given year by year as long as the asset continues to be used for the purpose of the taxpayer business. 4. Balancing Allowances: Is given or taken back when the Asset is sold or ceases. 5. Balancing Charges: To be used for business purposes. These allowances are designed to ensure that over the life of the asset the total allowed by way of Initial and Annual Allowance does not exceed the original cost less the selling price on disposal.
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Income Tax Return for Self-Employed
Filing Guide
Capital Allowances may be applied to an Asset over three(3) stages of its life: Stage 1 - Acquisition: When asset is purchased it is qualify for Initial or Investment Allowance. Stage 2 - Period of Use: Asset was in use during the year of assessment qualifies for Annual Allowance. Stage 3 - Disposal: Sale or disposal of an Asset qualifies for Balancing Allowance or Balancing Charge. The Types of Expenditures that Qualify for Relief are: • • • • • •
Industrial Buildings and Structures Non-residential Buildings Plant & Machinery Mines, Oil Wells, etc. Scientific Research Patents
Some Non-Qualifying Industrial Building in that no capital allowances are to be given for any building which is used as: • • • •
dwelling house retail shop showroom hotel or an office
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Income Tax Return for Self-Employed
Filing Guide
Where a part only of the whole of a building comes within the above categories and the cost of constructing that part does not exceed ten percent (10 %) of the cost of the whole, the whole of the building qualifies(provided of course, that the trade qualifies)example where a building is used in a qualifying trade half as a workshop and half as an office, the half in use as workshop is an ’an industrial building’ the other half is not. Items that do not depreciate or suffer wear and tear cannot be given Capital Allowance,they have infinite useful life. E.g. Books,reference materials such as ‘Laws of Jamaica’. To claim capital allowances, a Schedule 2 – ‘Capital Allowance Schedule must be completed and attached to the taxpayer yearly return. Capital Allowances must be claim on the ‘cost’ of the asset. If an asset was ‘revalued’ the allowance must have been claimed on the original cost and should have been claimed in the year of acquisition.
Business Losses Losses from a business can be set off against the total income from all sources received in the current year. If a loss cannot be fully offset, the balance may be carried forward indefinitely. NB. Restrictions can apply
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Income Tax Return for Self-Employed
Filing Guide
Income Tax Threshold and Rates
Calculation of Tax Liability Total income less business expense, and then subtract nil rate. (Tax at 25%) Total Income Less Business Expenses Statutory income Less nil rate (2016) Taxable income Tax (25% X $792,768)
$2,000,000 $ 650,000 $ 1,350,000 $796,536 $ 553,464 $138,366
Powers of the Commissioner General The Commissioner General is empowered by the Income Tax Act to make assessments in the absence of proper records, documents and information. This can be done at any time within six(6) years after the end of the chargeable year of assessment. To verify tax liability (ies), return (s) maybe randomly selected for audit.
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Income Tax Return for Self-Employed
Filing Guide
Good Record Keeping Well-kept records may shorten the length of time an income tax audit takes to be completed. Can help you get loans from banks and other creditors. Keeps you better informed about the financial position of your business . Can mean tax savings, as it can be used as a reminder of deductible expenses and credits Can help to verify all your business expenses for tax audit purposes. NB. In filing your annual return, income from all sources must be included. If you are also employed, any tax deducted by your employer is allowable as a credit against your liability.
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Income Tax Return for Self-Employed
Filing Guide
Next Step
Ask Crowe Horwath Jamaica for Help
Crowe Horwath Jamaica (www.crowehorwath.com.jm) is one of the largest public accounting, consulting, and advisory firms in Jamaica. Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services.
Crowe Horwath Jamaica serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world. The network consists of more than 200 independent accounting and advisory services firms in more than 130 countries around the world.
Contact our Head Office: Unit 34,Winchester Business Centre 15 Hope Road, Kingston 10 Tel: 876-9084007/ 7542074/ 9064827 Fax: 876-7540380 Email:info@crowehorwath.com.jm
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