Jamaica Personal Income Tax

Individuals who are resident and domiciled in Jamaica are taxed on worldwide income. Individuals who are resident but not domiciled in Jamaica are generally taxed on their Jamaican-source income and on foreign-source income that is re – mitted to Jamaica. However, if the individual is present in Jamaica in a tax year for a total of three months or more, any foreign em ployment income that relates to work done in Jamaica or else­where in relation to Jamaica, is subject to tax in Jamaica regardless of where it is received. Nonresidents are taxed only on Jamaican-source income and on remittances of foreign income to Jamaica.

In general, individuals are considered resident if they stay in Jamaica for six months or longer. Other factors that may be con­sidered include whether they (or their spouses) have a place of abode available for their use in Jamaica, and if they habitually visit Jamaica for substantial periods. The tax authorities are likely to regard periods totaling three months as substantial and visits as habitual if the individual is present in Jamaica for approxi­mately three months annually for four consecutive years.

For an individual who is in Jamaica for a temporary purpose only and not with an intent to establish residence, and who has not actually resided in Jamaica in any tax year for a period of six months (or periods aggregating to six months), income arising outside Jamaica is not subject to income tax in Jamaica.

All resident employees with annual income exceeding JMD592,800 are subject to tax. Nonresidents are generally not eligible for the JMD592,800 exemption available to Jamaican residents. To benefit from the income tax threshold of JMD592,800, a person must be in Jamaica for 183 days or more in the tax year. Self-employed individuals are also subject to tax.

Nonresidents are subject to tax on all Jamaican-source employ­ment income (unless specifically exempted under applicable double tax treaty provisions). A nonresident employed by a resident employer is treated as resident from the first day of employment.

A nonresident employed in Jamaica by a foreign employer for less than three months is taxed on remittances to Jamaica only. How ever, if the employee performs the work over a period of three months or longer in the tax year he or she is taxable in Jamaica, regardless of whether the payment is received in Jamaica.

Income subject to tax. The taxation of various types of income is described below.

Employment income. All compensation arising in Jamaica or accruing to any person from an office or employment in Jamaica is subject to tax. This includes salaries, wages and bonuses. Ben e-fits in kind and allow ances are taxable, but the Tax Commis sioner may allow a portion to be exempt.

Accommodation supplied by an employer to an employee is a benefit that is fully taxable to the employee.

The taxable value of the personal-use portion of a company car is determined in accordance with the following table.

Cost of                                Value of car benefit

motor vehicle                  Up to five                Over five

Not               years old                 years old

Exceeding exceeding (a)     (b) (a) (b)
JMD JMD JMD JMD JMD JMD

0 300,000 40,000 48,000 30,000 36,000
300,000 700,000 50,000 60,000 40,000 48,000
700,000 1,000,000 75,000 80,000 60,000 65,000
1,000,000 1,500,000 90,000 100,000 72,000 80,000
1,500,000 120,000 140,000 98,000 100,000
    a)Up to 50% private use during the year.
    b) More than 50% private use during the year.

Self-employment and business income. Residents are subject to tax on profits from self-employment and business activities as ordinary income at the rates described in Rates.

Investment income. Interest paid by specified entities (called “prescribed persons”) to individuals is subject to withholding tax at a rate of 25%. Prescribed persons include financial institutions, licensed securities dealers, life insurance companies, building societies, issuers of commercial paper, unit trust management companies, certain industrial and provident societies, the Ministry of Finance and certain other entities specified under the Income Tax Act.

Income tax of 15% is imposed on ordinary dividends paid by Jamaican resident companies to Jamaican resident shareholders, effective from 1 April 2013. Preference dividends paid to Jamaican residents that qualify for income tax deduction are subject to tax in the hands of the recipients. Ordinary dividends or preference dividends paid by Jamaican resident companies to nonresident individuals are subject to tax at a rate of 25% or at a lower rate prescribed by an applicable double tax treaty.

Directors’ fees. Directors’ fees are treated as taxable income for the tax year to which they relate and are subject to tax with other income at the rates described in Rates. Payments made to direc­tors as directors’ fees by an employer fall in the category of emoluments (because these individuals are holders of office) and are consequently subject to deduction of income tax at the cur­rent rate of 25%. If these directors are employed by the compa­nies (organizations) for which they serve as board members, they are also subject to other statutory deductions.

Concessionary loans. Directors and employees who, by reason of their employment in a specified financial institution, receive concessionary loans (loans at a rate of interest lower than the prescribed rate), are taxable on the cash equivalent of the benefit of the loan, that is, the difference between the interest at the pre­scribed rate and the interest actually paid at the concessionary rate.

Exempt income. If received from a superannuation or pension scheme approved by the Commissioner of Tax Administration Jamaica, lump-sum payments up to the prescribed limit specified by the Income Tax Act may be exempt from income tax. Lump sums paid from the government’s Consolidated Fund are not subject to income tax.

Individuals receiving a pension from an approved superannuation fund or from a pension or retirement scheme approved by the Tax Commissioner are exempt from tax on up to JMD80,000 of the income. The exemption is restricted to the lower of the pension income or JMD80,000 if the pensioner is under 55 years of age. Individuals 65 years of age and older enjoy an additional age exemption of JMD80,000.

Individuals classified as handicapped under the Income Tax Act are exempt from tax on all salary and pension income.

The above exemptions are available to both residents and non­residents.

Resident self-employed individuals are entitled to an income tax exemption for the first JMD592,800 of their income. This exemp­tion does not apply to nonresidents.

Capital gains. Jamaica does not impose tax on capital gains.

Taxation of employer-provided stock options. In practice, employer-provided stock options are taxable only at grant on the difference between the actual grant price and the market price at the grant date.

Deductions

Personal deductions and allowances. Pension contributions of up to 10% of an employee’s annual remuneration to approved pen­sion schemes and contributions to the national insurance scheme are deductible for the employee. However, if an employer con­tributes less than 10% of the employee’s annual remuneration, the employee may contribute the difference between the employer’s actual contribution and the maximum contribution payable by the employer (that is, 10%). The difference contributed by the employ­ee is also deductible for income tax purposes.

Business deductions. All expenses incurred wholly and exclusively in producing self-employment or business income are deductible. In addition, individuals who are self-employed and who make chari­table donations to charities may deduct these expenses, up to a maximum of 5% of taxable income.

Rates. A flat income tax rate of 25% applies to individuals, regard­less of the level of income.

Withholding tax is levied on overseas payments of management and technical service fees, dividends, interest, royalties and direc­tors’ fees.

Minimum business tax. An individual who operates a business that has statutory income (excluding income subject to tax at the nil rate under the Income Tax Act and income from emoluments) of not less than JMD5 million is required to pay a minimum business tax (MBT) of JMD60,000 in each tax year.

The individual taxpayer is entitled to a refund of the excess of the MBT if his or her income tax liability for the tax year is less than the MBT. If the amount is not refunded, it may be carried forward and credited against the income tax payable (but not the MBT) in any subsequent tax year.

Relief for losses. Losses from previous years may be carried for­ward for offset against current-year profits, but they may not exceed 50% of the aggregate amount of income of the taxpayer from all sources after allowing the appropriate deductions and exemptions. However, this limitation does not apply for the first five years of trade. It also does not apply if the taxpayer’s gross revenue from all sources for the relevant tax year is less than JMD3 million. No carryback is permitted.

Other taxes

General Consumption Tax on imported services. Effective from 1 January 2014, the reverse-charge mechanism applies to ser­vices that are supplied by nonresidents to persons resident in Jamaica (referred to as imported services). As a result, the General Consumption Tax (GCT), which is similar to a value-added tax), applies to these services at the standard rate of 16.5%.

The GCT applies to imported services if all of the following conditions are satisfied:

  • The service is supplied by a nonresident to a resident of Jamaica.
  • The service is intended to be or is used, consumed or enjoyed in Jamaica.
  • The supply of the service would have been a taxable supply if it was made in Jamaica by a registered taxpayer in the course or furtherance of the taxpayer’s taxable activity.

If the above conditions are satisfied, the GCT is accounted for by the Jamaican recipient of the service. If the recipient is a regis­tered taxpayer that has taxable supplies for GCT purposes, the recipient may claim a GCT credit (for the applicable GCT) in accordance with the GCT Act.

Transfer tax. Although Jamaica has no estate tax, transfer tax is payable on the transfer or other disposal of Jamaican property and interests in or rights in or over property. For purposes of the transfer tax, property includes land, leases of land and shares in Jamaican companies. The following are the rates of the transfer tax.

Rate (%)

Transfer by an individual while alive                                           5

Transfer on death:

On the first JMD100,000                                                             0

On the balance                                                                           1.5

Wills are probated in accordance with the laws of the country of domicile of the deceased, and real property is transferred accord­ing to the laws of the country where the property is located.

Stamp duty. If a mortgage is refinanced for an equal or lesser amount, stamp duty is payable at a rate of JMD100. If the refi­nancing is for a greater amount than the original amount, a stamp duty rate of 1.25 cents per JMD200 or part thereof applies to the additional amount secured (the difference between the refinanced amount and the original amount secured). Stamp duty at a rate of 1% applies to the transfer or other disposal of shares. A 4% rate applies to the transfer or other disposal of real estate.

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 in either of the following circumstances:

  • The gross payment relates to a single transaction with an invoice value of JMD50,000 or more (before application of GCT).
  • A series of gross payments of less than JMD50,000 (before GCT) aggregating to JMD100,000 or more are made to the same service provider in a 30-day period.

For the tax year in which the tax is withheld, the service provider from whom the tax is withheld may claim a tax credit for the withholding tax against any quarterly income tax obligation or 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.

Social security

Contributions. The applicable social security contributions and other payroll taxes are described in the following paragraphs.

National insurance rates are 5% for employed and self-employed workers, other than domestics, on annual earnings of up to JMD1,500,000. For employees, the 5% is paid one-half by the em ployee and one-half by the employer. For domestic work­ers, the employer and the employee each pay JMD10 a week. These contributions are mandatory.

National housing trust contributions are made at a rate of 5% of salary, borne 2% by the employee and 3% by the employer. Self-employed persons contribute at a rate of 3% of gross taxable income. Contributions by employees and self-employed persons, together with a bonus, are refundable to the contributor on an annual basis after seven years of contribution or in full after re tirement at 65 years of age.

An education tax is payable at a rate of 5.75% of salary, borne 2.25% by the employee and 3.50% by the employer. Self-employed persons are subject to tax at a rate of 2.25% of net taxable income (after de duction of pension and national insur­ance contributions).

Totalization agreements. To prevent double social security taxes and to assure benefit coverage, Jamaica has entered into totaliza­tion agreements with Antigua and Barbuda, Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Guyana, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago and the United Kingdom.

For purposes of the UK totalization agreement, the United Kingdom is defined to include Alderney, the Channel Islands of Guernsey, Herm, Jersey and Jethou, England, the Isle of Man, Northern Ireland, Scotland and Wales.

Tax filing and payment procedures

The income tax year in Jamaica is the calendar year. The relevant payroll taxes (income tax, national insurance contributions, edu­cation tax and national housing trust contributions) are withheld by employers from the wages of employees monthly under the Pay-As-You-Earn (PAYE) system. Taxes withheld must be paid to the Collector of Taxes by the 14th day of the following month or the last working day before the 14th of the month if the 14th falls on a weekend. The Jamaican government has proposed that all employees be required to file income tax returns. However, this change will be implemented in phases. If required, annual income tax returns must be filed, and the final income tax paid, by 15 March following the tax year.

Nonresident employees must file tax returns if requested by the Tax Commis sioner or if tax is overpaid and a refund is requested. Non resident self-employed persons who engage in business in Jamaica must file tax returns.

An individual may obtain a tax credit in Jamaica if tax is deducted from investment income. Prescribed persons such as banks and other financial institutions as described by the Income Tax Act normally withhold tax at a rate of 25% from investment income.

Double tax relief and tax treaties

Jamaica has entered into double tax treaties with Canada, China, Denmark, France, Germany, Israel, Norway, Spain, Sweden, Switzer land, the United Kingdom, the United States and CARICOM nations (Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago are signatories to this treaty). These treaties generally provide for reduced rates of withholding tax on dividends, interest, royalties, and technical or management fees.

Temporary visas

Foreign nationals from certain specified countries may visit Jamaica without a visa. A visa is required if a visit exceeds the time allowed by the immigration officer at the point of landing or if the foreign national’s home country is not one of the specified countries. A visa may be obtained in either the foreign national’s home country or in Jamaica.

A temporary visa is renewable. The number of times it may be renewed and the period of validity depend on the individual’s circumstances.

Work permits and self-employment

The right to work in Jamaica is relatively restricted. The Ministry of Labor and Social Security and the Ministry of National Secu­rity are responsible for ensuring that employment oppor tunities are made available to Jamaican citizens and permanent residents before being offered to foreign nationals.

Citizens of other countries coming to Jamaica to work are re quir­ed to have work permits (and visas if they are from non-British Commonwealth countries) if the visit exceeds two weeks; an ex emption is usually granted if the visit is for a shorter period. For eign nationals married to Jamaican citizens or born in Jamaica also receive exemptions from the work permit require­ment. If an exemption for a work permit is granted, then only a visa is requir ed. No legal restrictions exist on the employment of foreign nationals in any specific field; however, the work permit review board must be satisfied that a particular skill is not read­ily available locally at the time of application for a work permit.

Work permits are valid for the length of a foreign national’s em ployment contract, up to a maximum of three years. The work permit is renewable an indefinite number of times. The renewed permit is valid for the length of an employee’s contract, not to ex ceed three additional years. A fee is charged for the work permit.

A Jamaican employer must apply to the Ministry of Labor and Social Security for a work permit and then apply to the immigra­tion department of the Ministry of National Security for a visa before confirming an employment offer with a foreign worker. Students and persons on work-exchange programs who are not citizens of British Com monwealth countries must obtain visas and work permits before commencing employment. An application for a work permit generally takes two to eight weeks to process.

A self-employed person must apply to the Ministry of Labor and Social Security for a work permit and then apply to the immigra­tion department of the Ministry of National Security for a visa.

Residence permits

Residence permits are valid for the period allowed by the work permit for the employee and his or her children who are neither full-time students nor younger than 18 years of age. Otherwise, permits are valid for three years.

The residence permit is renewable an indefinite number of times. The renewed permit is valid for the same period as the original permit.

Family and personal considerations

Family members. A foreign national married to a Jamaican citizen or person born in Jamaica does not need a work permit. All other family members, however, must obtain work permits.

Marital property regime. The Family Property (Rights of Spouses) Act recognizes the union of a single man and single woman who have lived together continuously for a five-year period. The act grants the same property rights to common law unions as those granted to married couples.

Driver’s permits. Foreign nationals may drive legally in Jamaica using their home-country driver’s licenses for up to one year. Jamaica has driver’s license reciprocity with the United States and most British Common wealth countries. To obtain a local Jamaican driver’s license, an applicant is required to take a writ­ten examination and a road test.