Jamaica grants relief from taxation to persons who have been approved under the following incentive legislation:
- The Special Economic Zones (SEZ) Act.
- The Urban Renewal (Tax Relief) Act.
- The Income Tax Act (Junior Stock Market Companies).
- The Income Tax Relief (Large-Scale Projects & Pioneer Industries) Act.
- The Bauxite and Alumina Industries (Encouragement) Act.
- The Charities Act.
Special Economic Zones (SEZ)
The Special Economic Zones (SEZ) Act was passed in January 2016 and repealed the Jamaica Export Free Zones Act. It has established a regime to support the designation, promotion, development, operation, and management of SEZs.
A person may be declared to be a ‘developer’ or ‘occupant’ under the SEZ Act. Tax incentives that are available to a developer or occupant under the SEZ Act include a reduced rate of income tax and relief from property tax, transfer tax, GCT, and customs duty. However, these incentives are not available to developers or occupants who are eligible for relief under a number of other enactments.
A number of industries/business activities are specifically prohibited in the SEZ, including (but not limited to) mining or quarrying for natural resources, services pertaining to tourism, telecommunications, public utilities, financial services, construction, real estate, and property management.
The Urban Renewal (Tax Relief) Act
The Urban Renewal (Tax Relief) Act provides tax incentives to persons approved under the Act in connection with undertaking programmes of development in areas designated as special development areas, with a view to improving or restoring them. The tax incentive provides certain tax benefits, including relief from income tax on rental income and interest earned by an investor in an Urban Renewal Bond. There is also exemption from stamp duty and transfer tax on the transfers of property.
A tax credit based on expenditure incurred on capital improvement works in a designated special development area is also available. In addition, lessees of the improved properties, who satisfy certain criteria, are able to claim a tax deduction of double the rental paid.
The Income Tax Act (Junior Stock Market Companies)
Subject to certain conditions being met, a company listed on the Junior Market of the JSE is eligible for full exemption from income tax on their profits in the first five years from the date of admission to the Junior Market, with a 50% exemption from income tax on their profits in next following five years.
Employment tax credit (ETC)
The ETC is comprised of a non-refundable tax credit that is available to employers in computing their income tax liability. A number of taxpayers are ineligible to claim this tax credit.
The ETC is computed by reference to payroll taxes (excluding PAYE income tax) filed and remitted by their due date by the employer, subject to an overall cap. With a headline income tax rate of 25%, the ETC therefore provides tax-compliant employers with an opportunity to reduce the effective income tax rate on their trading profits to as low as 17.5%.
Where a company makes a distribution (dividends and certain other benefits to shareholders), the credit is clawed back by TAJ to the extent of 10% of the distribution, less the tax payable by the recipient of the distribution (i.e. the ETC claw back only applies where tax imposed on the recipient of the distribution is less than 10%). The credit clawed back must be repaid to TAJ within 14 days of the end of the month in which the distribution is made.
Incentives for large-scale projects/pioneer industries
The Income Tax Relief (Large-Scale Projects & Pioneer Industries) Act is designed to encourage innovation and high-value investments. It provides a mechanism through which additional income tax incentives can be offered in circumstances where the Minister of Finance designates (subject to affirmative resolution in Parliament) a project as an approved large-scale project or an economic activity as an approved pioneer industry.
Participants in either a designated large-scale project or a pioneer industry may subsequently be approved by Ministerial Order, which will stipulate the extent of relief granted. The income tax relieved under all orders issued pursuant to this mechanism in any year will be capped at 0.25% of the country’s gross domestic product (GDP) for the previous financial year.
Productive inputs relief (PIR)
There is relief from customs duty and additional stamp duty on the importation of certain ‘productive inputs’ that are directly used in the ‘production of primary products’ or the ‘manufacture of goods’. In addition to the manufacturing and agricultural sectors, relief is also granted on certain products imported for use in the tourism, creative arts, and healthcare industries.
The relief is subject to the proviso that imported items are not available in adequate supplies from a local manufacturer or from a manufacturer within the CARICOM Common Market area or are not otherwise prohibited from benefiting from this relief.
Bauxite and Alumina Industries (Encouragement) Act
A person engaged in winning bauxite and producing alumina in Jamaica may be approved as a recognised bauxite producer or a recognised alumina producer (or both) and obtain the following tax reliefs:
- Relief from customs duty, additional stamp duty, and GCT in respect of the importation of plant, machinery, trucks and other vehicles, and other specified material and equipment that are necessary for the winning, treatment, and transportation in Jamaica and shipping of bauxite and alumina.
- Relief from customs duty or other similar impost on the importation of certain petroleum fuels and oils (excluding petrol) during the concession period.
Tax incentives for charitable organisations
The Charities Act provides a mechanism for registered charitable organisations to obtain exemption from income tax, customs duty, GCT, property tax, stamp duty, and transfer tax.
Non-residents who place deposits with Jamaican banks can earn interest free of Jamaican tax in certain circumstances. The deposits may be designated in foreign currency or Jamaican dollars.
Employee Share Ownership Plan (ESOP)
Certain tax benefits accrue to employees and employers in respect of contributions to an approved ESOP as well as the allocation of shares from such plans.
Income tax credit for micro, small, and medium enterprises (MSMEs)
A non-refundable income tax credit of JMD 375,000 has been introduced for MSMEs commencing in the year of assessment 2020. The annual income tax credit will be available for both regulated and unregulated companies with annual revenues that do not exceed JMD 500 million. In the case of unregulated companies, the credit may be claimed in addition to any ETC available. The income tax credit must be utilised in the year in which it is granted and may not be carried forward to be claimed against income tax liabilities in subsequent years of assessment.
Foreign tax credit
The avoidance of double taxation is achieved by means of foreign tax credits available under most tax treaties or by means of exemption in the case of the CARICOM treaty. Under the provisions of the Income Tax Act, a foreign tax credit is also available to companies in Jamaica that have paid or are liable to Commonwealth Income Tax. Where recourse cannot be had through either of these methods, by convention, in practice, partial relief by way of expense deduction is granted against income for the foreign tax.