Jamaica

Inventory valuation

Inventories are valued at the lower of cost or market value. The Commissioner General, TAJ has not made any pronouncement on a required valuation methodology, but last in first out (LIFO) is not generally permitted.

Any method of valuation that accords with standard accounting practice should be acceptable for tax purposes, provided it is consistently applied at the beginning and end of the accounting period and it is not in contravention of the Income Tax Act.

Capital gains

There is no tax on capital gains. There is, however, a transfer tax on the market value of certain assets transferred and stamp duty payable on the transfer/disposal of shares or real property. See the Other taxes section for more information.

Dividend income

Ordinary dividends paid by Jamaican tax resident companies to Jamaican tax resident shareholders are liable to tax at the rate of 15%. The tax is to be deducted on payment by the distributing company and represents the final tax on such dividends. The Income Tax Act provides relief from taxation for dividends received by Jamaican tax resident corporate shareholders where they hold at least 25% of the voting rights of the distributing company (referred to as ‘group relief’).

Additionally, the dividend income on which tax is payable may not be offset by tax losses, and expenses incurred to earn the dividend are not deductible in arriving at chargeable income, with the exception of expenses incurred in respect of specified dividend income. Specified dividend income refers to the dividend income of companies that are subject to tax and are regulated by the Bank of Jamaica or the Financial Services Commission and whose dominant trade or business is comprised of making investments in loans, securities, and other financial assets. However, this exception does not apply to dividends enjoying group relief.

Preference dividends that qualify as tax deductible expenses of the paying company (see below) continue to be liable to tax at a rate of 25%/30% where the recipient is an individual and at the applicable CIT rate where paid to a company. Dividends paid to non-resident shareholders are subject to income tax thereon at the default rate of 33⅓% in the case of a company and 25% in the case of an individual (subject to any treaty protection or incentive relief available).

Subject to certain conditions being met, a company may claim an income tax deduction in respect of preference dividends paid during the year of assessment. However, to the extent that these preference dividends do not qualify for this income tax deduction, they will be treated on a similar basis as ordinary dividends.

Stock dividends

Stocks issued by way of the capitalisation of retained earnings (referred to as 'bonus issues') do not create a taxable distribution in the hands of the shareholders.

Interest income

Interest income is included in chargeable income and is subject to tax when received. Where interest is paid by a prescribed person, tax is deducted at source at the rate of 25% (see the Withholding taxes section for more information). The interest payable on certain securities issued by the government of Jamaica (primarily to non-residents) has been designated as being exempt from tax.

Royalty income

Royalty income is included in chargeable income.

Foreign income

Resident corporations are taxable in Jamaica on their worldwide gains or profits. This includes the income of a foreign branch of a Jamaican company, as well as dividends arising abroad. Non-resident corporations are generally taxable on Jamaican-sourced income.

Tax deferral is not permitted in Jamaica.