Kingston GMT -4
EY
+1 (876) 925-2501, +1 (876) 969-9000 8 Olivier Road
Fax: +1 (876) 755-0413
Manor Park Kingston 8 Jamaica
Principal Tax Contact
Juliette Brown
A. At a glance
+1 (876) 925-2501
Mobile: +1 (876) 990-7660 Email: juliette.brown@jm.ey.com
Corporate Income Tax Rate (%) 25/30/33⅓ (a)
Capital Gains Tax Rate (%) 0
Branch Tax Rate (%) 25/33⅓ (a)
Withholding Tax (%)
Dividends 15/33⅓ (b)
Interest 33⅓ (c)
Royalties 33⅓ (d)
Management Fees 33⅓ (d)
Insurance Premiums 15 (e)
Branch Remittance Tax 33⅓
Net Operating Losses (Years)
Carryback 0 Carryforward Unlimited (f)
(a) Unregulated companies are taxed at a rate of 25%, and regulated companies (excluding life insurance companies and building societies) are taxed at a rate of 33⅓%. An unregulated company is a company that is not a regulated company. A regulated company is a company that is regulated by any of the following:
• Financial Services Commission (FSC)
• Office of Utilities Regulation
• Bank of Jamaica
• The minister with responsibility for finance Building societies are taxed at a rate of 30%.
(b) The dividend withholding tax of 33 1/3% is a tax imposed on payments of dividends to nonresidents (the rate may be reduced by double tax treaties). A dividend withholding tax is also required to be deducted from dividend payments made by a Jamaican resident company to a Jamaican resident shareholder at a rate of 15%, unless the Jamaican shareholder is a Jamaican resident company that holds more than 25% of the voting rights of the distributing company. In such cases, the rate of income tax payable on the dividends paid is nil.
(c) This rate applies to interest paid to nonresident companies. Special rules apply to interest paid by prescribed persons (as defined). The withholding tax rates may be reduced under double tax treaties. The recipients of the payments must include the payments in taxable income reported on their annual income tax returns, and they may credit the tax against their annual income tax liabil ity.
(d) This is a final tax that is imposed on payments to nonresidents. The withhold ing tax rate may be reduced under double tax treaties.
(e) This withholding tax applies to insurance premiums paid by residents to nonresidents. However, the withholding tax does not apply if a Jamaican resi dent insurance company registered with the FSC pays the premium to an entity that meets all of the following conditions:
• It is not a connected company.
• It is in the business of writing contracts of reinsurance in the international market.
• It is not acting on behalf of a captive insurance company. (f) See Section C regarding a restriction on the loss carryforward.
B. Taxes on corporate income and gains
Corporate income tax. Companies are resident in Jamaica if the control and management of their affairs are exercised in Jamaica. Nonresident companies operating a branch on the island are taxed on profits derived from their Jamaican operations.
Tax rates. The standard rates of the income tax on profits are 33⅓% for regulated entities (excluding life insurance companies) and 25% for unregulated entities. Building societies are taxed at a rate of 30%. Life insurance companies are taxed at a rate of 25%.
Under the Betting, Gaming and Lotteries Act, the following are the amounts of the lottery tax payable:
• 25% of the gross weekly revenue derived from sales of lottery tickets with respect to a declared lottery
• 20% of the gross weekly revenue derived from promotion of a daily numbers game or instant lottery
Remittances overseas by branches of foreign companies are sub ject to branch remittance tax at a rate of 33⅓%. This rate may be different if a double tax treaty is in place.
The Special Economic Zones Act (SEZ Act) replaced the Free Zones Act (which provided certain tax benefits to companies that operated under that legislation; the act was repealed in 2015). However, under grandfathering provisions, companies that oper ated under the Free Zones Act are given a four-year period to transition to the new SEZ regime. Under the SEZ Act, chargeable income from a trade, vocation or profession of approved develop ers or occupants is subject to income tax at a rate of 12.5%. The income tax rate for approved developers or occupants may be reduced by a Promotional Tax Credit, which may be claimed for expenditure on research, development and trading.
Developers and occupants are exempt from income tax on profits derived from the rental of property in the SEZ, subject to certain restrictions. Dividend income is subject to income tax at a rate of 0%. Withholding tax of 0% applies to dividends paid out of prof its from a profession or vocation in the SEZ.
Under the Urban Renewal Act, which was introduced to promote the improvement of depressed areas, approved entities may obtain various types of tax relief for development carried out in areas designated by the Jamaican government as special development areas. The tax relief relates to income tax, stamp duty and transfer tax.
Withholding tax on specified services. Recipients of specified ser vices (as defined in the legislation) are required to withhold a 3% tax from payments made to suppliers of these services. The tax must be withheld if either of the following circumstances exist:
• The gross payment relates to a single transaction with an in voice value of JMD50,000 (approximately USD325) or more (before application of the General Consumption Tax [GCT; see Section D])
• A series of gross payments of less than JMD50,000 (before GCT) is made to the same service provider in a 30-day period, and these payments total JMD100,000 (approximately USD650) or more.
The service provider from whom the tax is withheld may claim, in the tax year of the withholding, a tax credit for the amount withheld against any quarterly income tax obligation or the tax due in the annual income tax return. Any excess credit for that tax year may be claimed as a refund or carried forward to be used in a future tax year.
Capital gains. No tax is imposed on capital gains. However, a trans fer tax of 2% is imposed on transfers of certain Jamaican property, including land and securities (see Section D). The 2% rate took effect on 1 April 2019 (a 5% rate previously applied). Stamp duty may also apply. The stamp duty rates on certain transactions were abolished and replaced by a flat fee of JMD5,000 per document.
Capital allowances are subject to recapture on the disposal of assets (see Section C).
Administration. The tax year is the calendar year. The Commissioner General may allow companies with an accounting year-end other than 31 December to pay tax based on income earned in that accounting year.
Income tax returns must be filed and payments made by 15 March of the year following the tax year to which the income tax return relates. Quarterly advance payments of tax must be made.
Interest of 16.63% per year is levied on late income (corporation) tax payments, and a penalty of 50% per year may also be imposed.
Dividends. In general, dividends paid to nonresidents are subject to a final withholding tax, and the tax withheld must be paid to the tax authorities in Jamaica. In general, withholding tax at a rate of 15% is imposed on dividends paid by Jamaican resident compa nies to Jamaican resident shareholders. However, if the company receiving the dividend holds more than 25% of the voting rights, the rate of income tax payable on such dividend is nil. Preference dividends that are deductible for income tax purposes are fully taxable in the hands of the shareholder at the income tax rate of the shareholder, regardless of whether the shareholder is resident or nonresident. Dividends paid out of capital are not subject to income tax, but they are generally subject to a transfer tax at a rate of 2% (the 2% rate took effect on 1 April 2019).
Foreign tax relief. For income derived from treaty countries, the tax rate is the treaty rate applicable to the direct corporate inves tor. The regular Jamaican corporate tax rate of 25% or 33⅓% is applied to income derived from non-treaty countries.
C. Determination of trading income
General. Taxable income is based on accounting income with ap propriate adjustments. To be deductible, expenses must be incurred wholly and exclusively in earning income.
Nondeductible expenses include capital expenditures, incorpora tion expenses and interest accrued but not paid. Contributions or
donations made to charities approved under the Charities Act by the Department of Cooperatives and Friendly Societies are deductible, up to a maximum of 5% of taxable income. Inventories. The first-in, first-out (FIFO) and weighted average methods of inventory valuation are allowed.
Provisions. To be deductible, bad debts must be specific. General provisions are not allowed.
Tax depreciation (capital allowances). The capital allowances are described below.
Initial allowance. An initial allowance of 25% of the cost of an asset is granted for certain types of assets, including office equip ment, computers, and plant and machinery used in the production or manufacturing of primary products or goods, as defined in the Income Tax Act. However, some office equipment and plant and machinery are not entitled to the initial allowance. Initial allow ances are granted in the year of purchase and are deducted from the depreciable value of the asset.
Investment allowance. A 20% investment allowance is granted instead of the initial allowance for buildings and plant and machin ery used in “basic industries,” such as the electricity and steam industries. Plant and machinery purchased in Jamaica must be new to qualify for the investment allowance. However, both new and used plant and machinery purchased overseas qualify for the allowance. The initial allowance is substituted for the investment allowance if the asset is disposed of within three years after its purchase. The investment allowance does not reduce the depre ciable value of an asset.
Annual allowance. Plant and machinery qualify for an annual allowance of 12.5%, calculated using the straight-line method. A 20% annual allowance, calculated using the straight-line method, is granted to trade vehicles. However, the maximum depreciable cost for vehicles that are not trade vehicles is an amount in Jamaican dollars that is equivalent to USD35,000 converted at the Bank of Jamaica weighted average selling rate as at 30 June in the year the vehicle was purchased. The annual allowance rate for non-trade vehicles is 12.5%, calculated using the straight-line method. Office equipment qualifies for an annual allowance of 20%, calculated using the straight-line method. Nonresidential and industrial buildings generally qualify for annual allowances, calculated using the straight-line method, at rates that range from 4% to 12.5%, depending on the type of material used to construct the building or structure.
Disposal of depreciable assets. Initial and annual allowances are generally subject to recapture on the sale of an asset, to the extent the sales proceeds exceed the tax value after depreciation. The amount recaptured (balancing charge) may not exceed the total of the initial and annual allowances granted. Any amounts recap tured are subject to tax at the regular corporate tax rate. If the proceeds are less than the tax-depreciated value, an additional allowance (balancing allowance) is granted.
Relief for losses. Losses may be carried forward indefinitely. However, each year, a loss carryforward may offset only 50% of the aggregate amount of income of the taxpayer from all sources
after allowing the appropriate tax deductions and tax exemptions. However, the limitation does not apply in the following circumstances:
• For the first five tax years following the tax year in which the trade commenced
• If the taxpayer’s gross revenue from all sources for the relevant tax year is less than JMD10 million (this threshold is effective from 1 April 2019; the threshold was JMD3 million up to 31 March 2019)
A carryback of losses is not permitted.
Groups of companies. The law does not contain any group loss relief or consolidated return provisions.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate
Customs Administrative Fee; rates vary depending on the product Various Environmental levy; imposed on the Cost, Insurance and Freight (CIF) value of all imported goods with a few exceptions 0.5%
General Consumption Tax, on the value added to goods and services; certain items are exempt
Standard rate 15% Telephone services, cards and instruments 25% Tourism sector
Hotels previously operating under the Hotel Incentives Act (HIA), but which now operate under the Fiscal Incentives Act 10% Hotels remaining under the HIA 15% Electricity for residential premises (electricity supply in excess of 150 kilowatt hours) 15% Electricity for commercial and industrial premises 15%
Certain commercial imports 15% (advance rate of 5%)
Group health insurance 15% Exports, government supplies and services of diplomats and international agents 0%
Assets tax; on taxable value of assets Life insurance and other regulated entities 0.25% (Effective from the 2019 tax year, the assets tax for nonfinancial institutions was abolished.)
Property tax; on gross asset
First JMD400,000 of asset JMD1,000
Asset in excess of JMD400,000 up to JMD800,000; rate on excess 0.50%
Asset in excess of JMD800,000 up to JMD1,500,000; rate on excess 0.55%
Asset in excess of JMD1,500,000 up to JMD3 million; rate on excess 0.60%
Nature of tax Rate
Asset in excess of JMD3 million up to JMD4,500,000; rate on excess 0.65%
Asset in excess of JMD4,500,000 up to JMD7 million; rate on excess 0.70%
Asset in excess of JMD7 million up to JMD12 million; rate on excess 0.75%
Asset in excess of JMD12 million up to JMD30 million; rate on excess 0.80%
Asset that exceeds JMD30 million; rate on excess 0.90%
Transfer tax, on transfers of certain Jamaican property, including land and securities 2%
Transfer tax on death for estates 1.5% Stamp duty Various Social security contributions National insurance scheme (NIS); imposed on annual earnings (income for self-employed individuals) up to JMD3,000,000 (JMD5,000,000 as of 1 April 2022); paid by
Employer 3% Employee 3%
Self-employed individual 6% National Housing Trust (NHT); paid by Employer, on payroll 3% Employee, on salary 2% Self-employed individual, on income 3% Human Employment and Resource Training program (HEART), on total payroll if it exceeds JMD173,328 a year; paid by employer 3% Education Tax, on taxable salary; paid by Employer, on payroll 3.5% Employee, on salary 2.25% Self-employed individual, on net earnings 2.25%
E. Miscellaneous matters
Foreign-exchange controls. Jamaica does not impose foreignexchange controls.
Debt-to-equity rules. No debt-to-equity restrictions are imposed.
Foreign-controlled companies. Subsidiaries of nonresident corpo rations are subject to income tax on their profits at a rate of 25% for unregulated companies or 33⅓% for regulated companies. Withholding tax at a rate of 33⅓% is generally imposed on divi dends remitted, unless a treaty provides a different rate.
Anti-avoidance legislation. Several anti-avoidance measures are in force. These measures generally apply to transactions between related parties that were not made at arm’s length.
Employment tax credit. A person other than a regulated company may be eligible to claim a nonrefundable tax credit (referred to as an employment tax credit [ETC]), up to a maximum amount of 30% of the income tax payable for each year. The amount eligible for the ETC is the total of Education Tax, NHT, NIS and HEART
payments made by an eligible person that are declared and paid on a timely basis during the year. The ETC that may be claimed is therefore the lower of the total statutory payments during the year and 30% of the tax payable. The application of this ETC is subject to certain additional criteria. It may not be claimed against income tax chargeable on non-trading income, such as interest and divi dend income. If a company that has claimed the ETC makes a distribution, it is, with respect to the ETC claimed, liable to repay as income tax 10% of the distributed amount less any tax payable by the recipient with respect to the distribution. However, if the tax payable on the distribution exceeds 10% of the amount of the distribution, no amount of the ETC is payable. In addition, the amount of the ETC repayable cannot exceed the total amount of the ETC claimed by the company.
Corporate tax credit. Effective from 1 January 2020, a body cor porate subject to income tax with gross annual revenues or sales of less than JMD500 million is entitled to claim a credit of JMD375,000 against income tax payable in any tax year. Any corporate tax credit that is not claimed in the tax year cannot be credited against the income tax payable in any other tax year and cannot be refunded. The following companies are not eligible to claim the corporate tax credit:
• Building societies and societies registered under the Industrial and Provident Societies Act
• A body corporate that has been declared to be an approved developer or approved organization under the Urban Renewal (Tax Relief) Act
• A body corporate that is a developer or occupant and is entitled to benefit from tax reliefs and incentives in the First Schedule of the Special Economic Zones Act
• A body corporate that has been declared to be a recognized bauxite producer or a recognized alumina producer, or both, under the Bauxite and Alumina Industries (Encouragement) Act
• Any person entitled to benefit from the incentives in the Seventh Schedule of the Income Tax Act
F. Treaty withholding tax rates
The rates reflect the lower of the treaty rate and the rate under domestic tax law.
Management Dividends Interest Royalties fees
%
Antigua and Barbuda (h)
15 15 15 Barbados (h)
Belize (h)
15 15 15
15 15 15
Canada 15/22.5 (a) 15 10 12.5
China Mainland
7.5 10 0
Denmark 10/15 (b) 12.5 10 10
Dominica (h)
15 15 15
France 10/15 (e) 10 10 10
Germany 10/15 (c) 10/12.5 (d) 10 33.3
Grenada (h)
Guyana (h)
15 15 15
15 15 15
Israel
Japan
Dividends Interest Royalties fees
% % % %
15/22.5 (e) 15 10 33.3
5/10 (j) 10 2/10 (k) 0 (e)
Mexico 5/10 (i) 10 10 10
Montserrat (h)
0 15 15 15
Norway 15 12.5 10 10 St. Kitts and Nevis (h)
0 15 15 15 St. Lucia (h)
0 15 15 15 St. Vincent and the Grenadines (h)
Spain
Sweden
0 15 15 15
5/10 (b) 10 10 10
10/22.5 (f) 12.5 10 10
Switzerland 10/15 (e) 10 10 10 Trinidad and Tobago (h)
United Kingdom
0 15 15 15
15/22.5 (a) 12.5 10 12.5
United States 10/15 (e) 12.5 10 0 (g)
Non-treaty
jurisdictions 33⅓ 33⅓ 33⅓ 33⅓
(a) Higher rate applies if payment is made to a company owning 10% or more of the voting stock of the payer.
(b) Lower rate applies if payment is made to a company owning 25% or more of the capital or voting stock of the payer.
(c) Lower rate applies if payment is made to a company owning 25% or more of the shares of the payer.
(d) Lower rate applies to interest received by a bank recognized as a banking institution under the laws of the state from which the payment is made.
(e) Lower rate applies if payment is made to a company owning 10% or more of the voting stock of the payer.
(f) Lower rate applies if payment is made to a company owning 25% or more of the voting stock of the payer.
(g) Management fees are not subject to withholding tax, but they are included in business profits. Consequently, net management fees are subject to tax in Jamaica only if the recipient has a permanent establishment there.
(h) These are the rates under the Caribbean Community and Common Market (CARICOM) tax treaty, which the listed country has ratified.
(i) Lower rate applies if payment is made to a company owning 25% or more of the capital of the payer.
(j) Lower rate applies if the beneficial owner is a company that has owned directly or indirectly throughout a 365-day period the following:
• At least 20% of the voting power or capital if a resident of Jamaica is the paying company
• At least 20% of the voting power if a resident of Japan is the paying com pany
(k) Lower rate applies to amounts paid for the use of, or the right to use, indus trial, commercial or scientific equipment.