Setting up a Company in Jamaica? Here is what you need to know about tax.

Are you doing business in Jamaica? Then you no doubt have questions about legal compliance and regulatory obligations for your new business.

The limited liability company is the main vehicle through which a modern business is run. It is usually the preferred choice for various reasons including: protection from personal liability of the shareholders through the separate legal personality of the company, creating a brand name that is recognisable and building a reputation for your business, keeping a degree of separation between personal finances and the finances of your business for purposes of data collection and budget planning, and separating the tax  liability of the business from the shareholders’ personal taxes, among others.

What taxes does a company have to pay? Well… it depends on your chosen business and industry. However, there are some obligations that all persons need to meet. Under the Income Tax Act every person must pay income tax every year[1] on all income, profits or gains earned by any person from:

1. Any real property whether in Jamaica or elsewhere

2. Any trade, business, profession, vocation, or employment

3. The provision of any personal property through rental, hire, or similar services

4. Any financial instrument (dividends, interest, annuities etc.)[2]

Rate of Income Tax

Now you might be asking at what rate is income tax payable for your business in Jamaica? If your business is a regulated company, meaning a company that is regulated by the Bank of Jamaica, the Financial services Commission, the Office of Utilities Regulation or the Ministry of Finance, then your company must pay a corporate income tax rate of 33.33% on its chargeable income. If your Business is not a regulated company, then your company must pay a corporate income tax rate of 25% on its chargeable income.

Exemptions from Income Tax

If you’re looking to be efficient with your businesses tax exposure, it might be worth your while to note that the following streams of income are exempt from income tax:

1. Income derived from investments or deposits in a building society.

2. Investments made in a hotel enterprise or approved extension of a hotel or a resort cottage.

3. Income accruing to a body corporate in Jamaica in its capacity as Trustee under a qualified unit trust scheme.

4. Interest paid by the Commissioner of Inland Revenue.

5. Profits or gains accruing to an individual, who is not a dealer in securities, from transactions carried out on the Jamaica Stock Exchange- so long as the profits or gains do not exceed one-half of his statutory income from all other sources for the year of assessment.

Should you collect General Consumption Tax?

General Consumption tax (“GCT”) is a form of value-added tax (“VAT”) that is payable in Jamaica. Currently, GCT is generally assessed at 15% of the value of the good(s) or service. However, certain goods and services, such as the provision of telephone services, attract a higher rate of GCT.  If you are in doubt about the GCT applicable to your business, then it would be best to contact a lawyer for assistance.

In Jamaica GCT is payable on the importation into Jamaica of goods and services and the supply of goods and services by a taxpayer.

Every company will be given a Taxpayer Registration Number (“TRN”) on incorporation which makes the company a registered taxpayer. Separately, if your business is not incorporated but simply registered as a business name you should note that every business that is registered at the Companies Office of Jamaica will also have a TRN associated with it. The TRN of a registered business name is attached to or a variation of the TRN of the business owner. This is the case whether that business owner is an individual or a company.

Generally, it is the responsibility of the registered taxpayer to collect the GCT on the goods and services supplied by him to another taxpayer and pay that tax over to the Tax Administration of Jamaica (TAJ). Additionally, a service importer is liable to collect and pay over the GCT in relation to the importation of those services, even if the service provider is not a registered taxpayer in Jamaica[3].  

Certain goods and services are exempt from GCT. The list of items exempt from GCT includes a range of basic food items, prescription drugs, certain medical supplies, as well as certain construction, transportation, and financial and insurance services.  The full list of these goods and services can be found in the Third Schedule of the General Consumption Tax Act.  If your business or company does not meet or exceed the GCT registration threshold which is currently set at a revenue of fifteen million Jamaican dollars (J$15,000,000.00) in a financial year of the company, then your business is not allowed to collect or pay over GCT.

Statutory Contributions

Self employed persons and employees are required in Jamaica to make certain contributions to national funds by statute. These include the National Insurance Scheme (“NIS”), the National Housing Trust (“NHT”) and Education Tax.

NIS Contributions range between 3% -6% of your income. If you have employees, the employer is required to make an NIS contribution on behalf of the employee at a rate of 3% of the wages up to 1.5 million Jamaican dollars and the employee is required to make a contribution of 3% of his wages up to 1.5 million. Self-employed persons are required to make a contribution of at a rate of 6% of their annual wage up to a maximum of J$3 million.  

Education tax is required to be paid at a rate of 3.5% of the employee’s wages by employers and at a rate of 2.25% of wages after the deduction of NIS and pension contributions by the employee. Self-employed persons are also required to contribute at a rate of 2.25% of what they earn in a year.

NHT contributions are to be made by employers at a rate of 3% of the taxable salary while employees contribute to the NHT at a rate of 2% of their taxable salary.  Self-employed persons are also required to contribute at a rate of 2% of their earnings.

Conclusion

There are other tax saving methods that could be applicable to your business such as taking advantage an employee tax credit or contributing to approved superannuation funds to reduce your business’s tax liability. This article is about the basic minimum that new business owners need to know in understanding the tax laws in Jamaica.  It is a starting point. If you require further detail, consider reaching out to your lawyer for assistance in relation to the specific information you need.

Luke Phillips is a Lawyer practicing in Jamaica and can be contacted through his firm’s website at Phillipscolaw.com or via email at Lukephillips@phillipscolaw.com. This article is for general information purposes only and does not constitute legal advice.

[1] Income Tax Act S 6

[2] Income Tax act S 5

[3] General Consumption Tax Act S 23B