Corporate tax in Jamaica

Summary

Corporate Income Tax Rate (%) 25 / 33.3 (a)
Capital Gains Tax Rate (%) 0
Branch Tax Rate (%) 25 / 33.3 (a)
Withholding Tax (%)
Dividends 15 / 33.3 (b)
Interest 33.3 (c)
Royalties 33.3 (d)
Management Fees 33.3 (d)
Insurance Premiums 15 (e)
Branch Remittance Tax 33.3
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) are taxed at a rate of 33.3%. An unregu­lated company is a company that is not a regulated company. 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
  • 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 is a tax imposed on payments to nonresidents (the rate may be reduced by double tax treaties). Tax is required to be de­ducted from dividend payments made by a Jamaican resident to a Jamaican resident shareholder at a rate of 15%, unless the Jamaican shareholder is a company that holds more than 25% of the voting rights of the distributing company. In such cases, the dividends may be paid without deduction of tax.

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 tax treaties. The recipients of the payments include the payments in taxable income reported on their annual income tax returns, and they may credit the tax against their annual income tax.

d) This is a final tax imposed on payments to both residents and nonresidents. The withholding tax rate may be reduced under tax treaties.

e) This withholding tax applies to all insurance premiums paid by residents to nonresidents. However, the withholding tax does not apply if a Jamaican resi­dent insurance company 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.

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 tax on profits are 33.3% for regulated entities (excluding life insurance companies) and 25% for unregulated entities. Building societies are taxed at a rate of 30%. Effective from the 2015 tax year, 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 sub­ject to branch remittance tax at a rate of 33.3%.

Companies registered under the Jamaica Export Free Zones Act are relieved from tax on income derived from the manufacturing and international trading of products. This relief does not have a time limit.

Under proposed legislation, the incentives offered under the Jamaica Export Free Zones Act would be phased out by 31 December 2015 and replaced by a Special Economic Zones regime, which would offer a single uniform corporate income tax rate of between 10% and 12.5%, together with an exemption from dividend tax for shareholders resident abroad.

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.

Minimum business tax. Effective from 1 April 2014, all entities other than registered charitable organizations are subject to a minimum business tax of JMD60,000 (approximately USD502), for each tax year. The tax is payable in two equal instalments of JMD30,000 (approximately USD251) on or before 15 June and 15 September of each year.

Withholding tax on specified services. Effective from 1 September 2015, recipients of specified services (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 invoice value of JMD50,000 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 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 trans­fer tax of 5% is imposed on transfers of certain Jamaican prop­erty, including land and securities (see Section D). Stamp duty may also apply.

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 20% 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 compa­nies 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, 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 of 5%.

Foreign tax relief. For income derived from treaty countries, the tax rate is the treaty rate applicable to the direct corporate inves­tor. The regular Jamaican corporate tax rate of 25% or 33.3% is applied to income derived from non-treaty countries.

Determination of trading income

General. Taxable income is based on accounting income with ap­propriate adjustments. To be deductible, expenses must be incurred wholly and exclusively in earning income.

Nondeductible expenses include capital expenditures, incorpora­tion expenses and interest accrued, but not paid. Charitable dona­tions approved by the Minister of Finance 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 equip­ment, computers, and plant and machinery, as defined in the Income Tax Act. However, some office equipment and plant and machinery are not entitled to the initial allowance. Initial allow­ances 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 machin­ery used in 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 depreciable 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 motor 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. 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 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 may not exceed the total of the initial and annual allowances granted. Any amounts recaptured are subject to tax at the regular corporate tax rate. If the proceeds are less than the tax-depreciated value, an additional 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 years of trade
  • If the taxpayer’s gross revenue from all sources for the relevant tax year is less than JMD3 million

A carryback of losses is not permitted.

Groups of companies. The law does not contain any group loss relief or conso lidated return provisions.

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
0.50%
General Consumption Tax, on the value
added to goods and services; certain
items are exempt
Standard rate 16.50%
Telephone services, cards and instruments 25.00%
Tourism sector
Hotels previously operating under the Hotel
Incentives Act (HIA), but which now
operate under the Fiscal Incentives Act
10.00%
Hotels remaining under the HIA 16.50%
Electricity for residential premises
(above 350 kilowatts per hour)
16.50%
Electricity for commercial and industrial
premises
16.50%
Certain commercial imports 16.5%
(advance rate of 5%)
Exports, government supplies
and services of diplomats and
international agents
0.00%
Assets tax; on taxable value of assets
General JMD5,000 to JMD200,000
Specified regulated entities 0.25%
Property tax; on gross asset
First JMD100,000 of asset JMD1,000
Asset in excess of JMD100,000 up to
JMD1 million; rate on excess
1.50%
Asset that exceeds JMD1 million;
rate on excess
2.00%
Transfer tax, on transfers of certain
Jamaican property, including land and
securities
5.00%
Transfer tax on death for estates 1.50%
Stamp duty Various
Social security contributions
National insurance scheme (NIS); imposed
on annual earnings (income for self-employed
individuals) up to JMD1,500,000; paid by
Employer 2.50%
Employee 2.50%
Self-employed individual 5.00%
National Housing Trust (NHT); paid by
Employer, on payroll 3.00%
Employee, on salary 2.00%
Self-employed individual, on income 3.00%
Human Employment and Resource
Training program (HEART), on total
payroll if it exceeds JMD173,328 a year;
paid by employer
3.00%
Education tax, on taxable salary; paid by Employer, on payroll 3.50%
Employee, on salary 2.25%
Self-employed individual, on net earnings 2.25%

Miscellaneous matters

Foreign-exchange controls. Jamaica does not impose foreign-exchange controls.

Debt-to-equity rules. No debt-to-equity restrictions are imposed.

Foreign-controlled companies. Subsidiaries of nonresident corpo­rations are subject to income tax on their profits at a rate of 25% for unregulated companies or 33.33% for regulated companies. Withholding tax at a rate of 33.3% is generally imposed on divi­dends 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 claim ed against income tax chargeable on non-trading income, such as interest and divi­dend income.

Treaty withholding tax rates

The rates reflect the lower of the treaty rate and the rate under domestic tax law.

Dividends (%) Interest (%) Royalties (%) Management fees (%)
Antigua and
Barbuda (h) 0 15 15 15
Barbados (h) 0 15 15 15
Belize (h) 0 15 15 15
Canada 15/22.5 (a) 15 10 12.5
China 5 7.5 10 0
Denmark 10/15 (b) 12.5 10 10
Dominica (h) 0 15 15 15
France 10/15 (e) 10 10 10
Germany 10/15 (c) 10/12.5 (d) 10 33.3
Grenada (h) 0 15 15 15
Guyana (h) 0 15 15 15
Israel 15/22.5 (e) 15 10 33.3
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) 0 15 15 15
Spain 5/10 (b) 10 10 10
Sweden 10/22.5 (f) 12.5 10 10
Switzerland 10/15 (e) 10 10 10
Trinidad and
Tobago (h) 0 15 15 15
United
Kingdom 15/22.5 (a) 12.5 10 12.5
United States 10/15 (e) 12.5 10 0 (g)
Non-treaty
countries
33.3 33.3 33.3 33.3

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.