If you are looking for information on personal income tax in Jamaica, you have come to the right place. You can find out what is the personal tax threshold in Jamaica and the rates of income tax. You can also learn about the non-cash benefits that you can exempt from income tax. Keeping this information in mind can help you make the best financial decisions in the country.
Exemptions from paying income tax in Jamaica
In Jamaica, you can claim some exemptions from paying income tax. Certain types of income are exempt, including social security contributions, pension scheme contributions, and interest on capital. You can also make approved charitable contributions, which are capped at 5% of taxable income. The first JMD 1,500,096 of statutory income is tax free.
There are different thresholds for different people. People who are self-employed must pay taxes to the Tax Administration Jamaica, and the rates for self-employed individuals and employees are different. Moreover, Jamaican companies are required to withhold tax when paying out dividends. Registered charitable organizations and approved superannuation funds are also exempt from paying income tax.
You can also claim some exemptions if you have a US bank account in Jamaica. For the first US$100,000 of foreign-earnedearned income, you’ll receive a tax credit of $1 for every dollar you pay in Jamaica. However, you need to combine the Foreign Tax Credit with the Foreign Earned Income Exemption to get a larger tax credit. If you want to claim both of these exemptions, you’ll need to file a form 1040 and request an extension.
The Minimum Business Tax, or MBT, is a new tax that took effect in April 2014. This tax requires businesses in Jamaica to pay a minimum of $60k over two years. It applies to both local companies and those that conduct business in Jamaica. It also applies to companies operating under an income tax incentive regime.
Income tax threshold of $592,800 per annum
The increase in the income tax threshold for the year 2016 will go into effect on July 1, 2016. The new threshold for PAYE (Pay As You Earn) employees will be $592,800 per annum, which will result in an effective threshold of $796,536 for the year of assessment 2016. The breakdown of tax savings for an individual is $8,489 a month.
The new threshold will apply to all residents and non-residents. It will apply to investment income, profits from a trade profession, dividends, and purchase annuities. It will not apply to persons earning more than $5 million. People aged 65 and over may claim a tax exemption of up to $80,000.
The new threshold will benefit 251,000 individuals. The current $592,800 per annum threshold will cause approximately 125,000 people to drop out of the PAYE system. However, a new threshold will benefit at least 251,000 individuals and will increase the budget for the fiscal year 2016/17. However, the increase in income tax will mean a hike in the tax rate, which will increase to 30% for persons earning more than $6 million a year.
Rate of income tax in Jamaica
The Rate of Income Tax in Jamaica is 25% for individuals but increases to 30% for those with income above the higher threshold. For tax purposes, individuals must be based in Jamaica and have income that is sourced in the country. In contrast, non-residents are not subject to income tax in Jamaica if they are based abroad, even if they have a residence in the country. Only certain personal deductions are valid in Jamaica, including Social Security contributions to pensions. Capital gains are not taxed in Jamaica, but a transfer tax applies on the market value of certain assets.
Income tax in Jamaica is based on a specific tax year. The rates and personal allowances apply to the taxable income for that particular year. Moreover, tax losses are not applicable against income from dividends. In addition, expenses incurred in the process of earning the dividend cannot be deducted from the chargeable income.
The IMF programs introduced by the government have helped the country to reduce its tax burden while attracting investments. The government has also streamlined its income tax regime and codified tax incentives for investors. In addition, the government has enacted a Charities Act, which allows corporations to claim tax deductions for charitable contributions. Some large multinational corporations and publicly listed companies maintain foundations in Jamaica to support charitable organizations.
GCT applies to goods and services sold or imported in Jamaica. The current rate is 15%, but certain goods may be exempt or assessed at zero. Also, GCT is charged on services imported into Jamaica from a country other than Jamaica. However, the services must be utilized in Jamaica. This is a good thing for expatriates since it allows them to catch up on taxes without incurring large penalties.
In addition, companies have to pay the Contractor’s Levy and the GART, a levy on certain activities. These levy payments must be remitted to TAJ within 14 days of payment. Excess contractors levy payments can be used as income tax credits.
Exemptions from paying income tax on non-cash benefits
If you receive a pension or other non-cash benefits from your employer, you may be eligible to receive an exemption from paying income tax. Typically, this relief entitles you to an exemption up to a certain amount. In 2017, this limit was set at $4,050 per person. That means that for a family of four, this exemption could save you as much as $16,200 in taxes.
When it comes to pensions, a pensioner should know that he or she will be able to claim an exemption if they have resided in Jamaica for at least six months. In order to qualify, the pensioner must declare world income (which includes any income earned outside of Jamaica) and any applicable credits. The allowance is $80,000 if the person is 55 years or older and is receiving a pension.