Whether you’re just beginning to consider investing in Jamaica, or if you’ve already made the move, there are a few things you’ll want to know about the Jamaica income tax system. From the tax rate to the residency requirements, you’ll want to make sure you’re informed so you can maximize your investments and avoid costly penalties.
Corporate income tax
Developing countries have become embroiled in a race to lower their national corporate income tax (CIT) rates. The global average CIT has dropped from 46.5% in 1980 to 25.4% in 2021. Traditionally, foreign direct investment has been attracted to countries with low CIT rates. But this has not always been the case.
Some developing countries are still ambiguous about their attitudes towards OECD-sponsored reform. One is Jamaica, a country that has lowered its CIT from 30% to 15%.
A new law, introduced by Jamaica’s government, allows for a wider range of collateral for tax-deductible transactions. This includes real estate and securities. The new law also allows for a general description of collateral and will make the filing of taxes a simpler process.
The new law also increases the amount of depreciation that companies can claim for industrial and commercial buildings. In addition, some construction services are exempt from VAT charges.
There are also a number of other tax deductions that Jamaica businesses can qualify for. One such deduction is the Capital Allowance, which allows taxpayers to deduct capital expenditure against their annual taxable income.
The government has also increased rates for stamp duty and property transfer taxes. These taxes are payable in two equal installments. The first installment must be paid by June 15th and the second by September 15th.
Jamaica has also introduced a new minimum business tax, which is applied on individuals with gross annual revenue exceeding JMD 3 million. This tax was introduced as part of a plan to improve tax compliance in Jamaica. It is not a substitute for an income tax, but it is payable in addition to other taxes that businesses pay.
Non-resident company income tax
Depending on the location of the central management, a non-resident company will have to pay Jamaican-sourced income tax. The company’s income is taxed at 25% of the company’s income is between $4 million and $6 million JMD (Jamaican dollars).
The income tax is also levied on individuals, companies, and trusts. There are also taxes on certain assets. For example, land and certain types of property are subject to transfer tax. The transfer tax is assessed within 30 days of the transaction.
Income tax is also levied on dividends, which is the payment of money to a person or corporation. If the dividend is paid out by a company in Jamaica, the company must withhold tax on the dividend. The tax is assessed at 2% of the market value of the asset.
Other tax deductions in Jamaica are available for certain business types. For example, a company in the building and construction industry may be eligible for a tax holiday. However, the tax holiday may be withdrawn if the business fails to fulfill the requirements.
There are also certain exemptions from income tax in Jamaica. These include income from approved superannuation funds. The income tax also excludes transfers to registered charitable organizations. Other organizations, such as building societies, are regulated by the Ministry of Finance.
Companies are also required to pay stamp duty. The rate of stamp duty varies depending on the type of document. Some goods may be assessed at 0%, while others may be assessed at a higher rate. The stamp duty is assessed and payable within the period indicated in the notice of assessment.
In addition to income and stamp duty, the Government of Jamaica charges a transfer tax on the market value of certain assets. This tax is payable on the importation of goods into Jamaica, as well as on the supply of goods or services in Jamaica.
Withholding tax rates
Whether you are a resident or non-resident company, you are liable to pay withholding tax. It is not imposed separately at the local level but is collected by the tax administration at the national level. The tax administration collects the tax in fourteen days after the month of withholding.
There are a number of exceptions to the rule that non-resident companies are not liable for income tax. These include non-resident companies that are registered in Jamaica, non-resident companies that are incorporated in Jamaica, companies that are owned by Jamaicans, and companies that have a registered office in Jamaica. Companies that are registered in another country must establish their tax residency in another country. In addition, non-resident corporations are liable for income tax in Jamaica if their income is earned from Jamaica or is remitted to Jamaica.
In general, non-resident companies are liable to pay withholding tax on the earnings of their employees. They also have to pay withholding tax on dividends. The rate varies depending on the source of income, but it is usually 10%. It is also possible to get lower rates of withholding tax if your country has a double taxation treaty with Jamaica.
Other companies are required to pay business tax, which is calculated as a percentage of revenue. The rate for non-resident companies is three-thirds of the tax rate for resident companies. It is also possible to get a tax holiday if you operate in an encouraged industry.
In addition, there is a special tax on the sale of immovable property. It is based on the rental value of the property. These special taxes can be as high as 1% or 1.5% of the gross sales price.
Housing accommodation provided to an employee by an employer is a taxable benefit
Whether or not you will be paying income tax in Jamaica on housing accommodation that your employer provides you depends on the type of housing accommodation, whether it is provided to you as a service, and whether or not the accommodation is taxable. A tax-free allowance of JMD 5,739 per annum is given for wearing uniforms. However, if the employee is not working in the same country as their employer, they are not entitled to this tax-free allowance.
In the case of residential accommodation, the taxable value of the housing accommodation varies depending on the amount of money that your employer pays you as a rent or lease. Generally, if your employer is a Jamaican tax-resident company, you are taxable on all ordinary dividends that you receive. If you are not a Jamaican tax-resident, you are only taxable on ordinary dividends that are paid by other tax-resident companies. However, you may be subject to a lower withholding rate if you live in a country with which Jamaica has a tax treaty.
