Income Tax - Everything you need to know.

Income Tax is a tax on a person’s statutory (chargeable) income. It is important that all taxpayers submit their returns and pay their taxes on time, as these funds provide the necessary income for Government to finance its expenditure on such social services as Education, health care, road maintenance, national and social security.

Tax Administration Jamaica (TAJ) administers the Income Tax Act in respect of audits and assessments. Our responsibility is in ensuring that all the requirements of the Act are adhered to, and all taxpayers shoulder their fair share of the tax burden.

A. DEFINITIONS

1. What does the word “threshold” mean?

Although not defined in the Income Tax Act, the threshold normally refers to that part of an individual’s statutory income which bears no tax.

2. What is “Statutory Income”?

Statutory Income is the aggregate amount of income of any person from all sources, remaining after allowing for the appropriate deductions and exemptions given under the Income Tax Act. (See below)

A 58 year old pensioner receives the following gross income:

Salary	$120,000.00
Net Rental	$ 18,000.00
Interest Income (gross)	$ 6,000.00
Pension	$ 30,000.00
Total:	$174,000.00
The following deductions are made from salary -
NHT	$ 2,760.00
Education tax	$ 2,400.00
NIS	$ 480.00
Approved Superannuation	$ 6,000.00
Total income as above		$174,000.00
Less Allowable Deductions:
NIS	$ 480.00
Approved Superannuation	$ 6,000.00
Pension Exemption	$ 80,000.00
		$ 86,480.00
		$ 87,520.00

Statutory Income $87,520.00The income tax is charged on the amount of $87,520.00

3. What does the term “emoluments” mean?

The term includes salaries, wages, overtime pay, fees, bonuses, perquisites, accommodation, entertainment utilities and other benefits of employment in money or otherwise.

4. Who are “Prescribed Persons”?

Prescribed persons include Banks, Building Societies, Co-operatives and Institutions operating under The Financial Institutions Act.

B. REGISTRATION & TRN REQUIREMENTS

1. How do I register with Tax Administration Jamaica?

Registration for all tax types begin with the Taxpayer Registration Center (TRC). All taxpayers should obtain a Taxpayer Registration Number (TRN) from the TRC, or any Revenue Service Center/Tax Office. In addition,
Individuals with income over the applicable nil rate/threshold should notify the Department.

2. If I have more than one TRN, what should I do?

Advise TAJ (TRC) immediately. You will be advised of the number to be used.

3. When should I quote my TRN?

TRN must be affixed on all returns and correspondences with TAJ and all other Tax Departments.

4. Should I inform TAJ if I change my business address?

Yes, and this should be done as quickly as possible.

C. FILING RETURNS

1. Who must file a Return?

Companies
Partnerships
Self-employed Individuals (including Partners) and employees with other sources of Income.
Other Bodies

2. Should an individual file returns?

Yes , if any of the following applies -

(i) If you are employed and have other sources of income.

(ii) If you are conducting business as a self-employed person - even if you have suffered a loss.

NB: However, a person in employment with no other source of income who believes that all his taxes are deducted by his employer and whose name appears on the employer’s annual return (SO2/IT06) need not file.

3. Should my Income Tax return be submitted even when I suffer a loss in any Year of Assessment?

Yes. An Income Tax return is to be submitted as long as you are conducting business even where the net result is a loss.

4. I am self-employed, and did not submit any of my yearly returns. I am now applying for a Tax

Clearance Certificate (TCC). Do I have to file income tax returns for the last six (6) years.

Yes. Self-employed individuals, other bodies and employees with other sources of income must file a final Tax return for the previous year and an estimated Tax return for the current year, no later than March 15.
The estimated Income Tax should be paid quarterly to the Revenue Centres and Tax Offices by March 15, June 15, September 15, and December 15.

5. What happens if I fail to file an Annual return?

The Commissioner General, Tax Administration Jamaica (TAJ) may send you an estimated assessment inclusive of penalty, or may issue a Court Summons for the return.

D. BENEFITS, ALLOWANCES & PENALTIES

1. Are Uniforms and Laundry allowances taxable?

Yes, since January 1, 1995. However, there are certain categories of employees who are exempt (See Appendix B, Regulation 12). The exemption limits the uniform allowance to $5,739 per annum, and laundry allowance at $3395 per annum.
Where uniforms are supplied by employers, they must do the following:

(a) where an employee falls in the exempt category, deduct tax at 25% on the cost to the

employer, in excess of $5739.00 e.g.

Cost to Employer	$10,000
Exempt amount	$5,739
excess	$4261 x 25%

(b) where an employee does not fall in the exempt category, deduct tax at 25% on of the cost of the uniform e.g. $10,000 x 25% =$2,500.00

2. What items should not be included in emoluments?

Uniform and laundry allowances not exceeding $5739 and $3395 respectively, paid to any employee required to wear a uniform, as approved.
Meal allowances in relation to work done outside of normal working hours.
Material allowances paid to persons employed as teachers in educational institutions.
The amount of any approved or reimbursable expenses incurred by an employee on behalf of his employer, such as travelling allowance.

NB: Employers must seek approval from the Commissioner General (TAJ), for the tax free payment of traveling allowances.

3. Should my Employer deduct tax from all my emoluments?

Yes. Your employer has the responsibility of deducting tax and paying it over to the Revenue Service Centres or Tax Offices, within fourteen (14) days after the end of the calendar month in which the tax was deducted.

4. How is tax deducted from an Employee’s earnings?

Arrive at the employee's total emoluments less allowable deductions - (e.g. NIS, and Approved Superannuation Contributions) - subtract nil rate (tax free) income (weekly: $557,232/ 52 = x), or (monthly: $557,232 / 12 = y) and then apply rate of tax of 25% to the remainder.

5. How do I calculate my tax liability?

Arrive at your statutory income (i.e. total income less allowable deductions), deduct nil rate (tax free) from statutory income and tax the remainder at 25%.

6. If I am due a refund, is my Employer responsible for refunding this amount?

Yes, but only those refunds due within the current calendar year. Refund claims for previous years are processed and settled by Tax Administration Jamaica.

7. Can an employee arrange with his Employer to deduct less or no tax?

No. An Employer has an obligation to deduct the correct tax from an employee’s emoluments and pay over these sums to the Revenue Services Centre or Tax Offices island wide.

8. Do PAYE deductions apply to retroactive salaries? How are they taxed?

Yes, tax deductions are to be made from retroactive salaries. Employers should add back pay to weekly or monthly emoluments and tax accordingly.

9. I recently resigned my job. What should I get from my Employer?

If you leave your employment within the calendar year (January to December), you should obtain parts two (2) and three (3) of the leaving Certificate (P45). The employer will send Part One to the Commissioner General (TAJ). If you get a new job, you should give Parts two (2) and three (3) to your new employer who will use the information on the Leaving Certificate to continue the deduction of tax.

If you are not employed after six (6) weeks then you may apply to the Commissioner General (TAJ), for an unemployment refund using Parts two(2) and three(3) along with the completion of Form P22, which is available from the TAJ Refunds Unit, or any of the Tax Offices island wide.

NB: Employers must deduct tax on the week 1 and month 1 basis, where they have new employees during the year, and these employees did not supply them with parts 2 and three of the P45.

10. I am employed and would like to submit my own income tax return. Am I to get any documents from my employer?

Yes, you should get your Certificate of pay and tax deducted (P24). Please note that once an employer issues a leaving Certificate (P45) to an employee and that employee is not re-employed by the employer, a P24 should not be issued by this employer.

11. I have two jobs. How should I be taxed?

You must apply to the Commissioner General (TAJ), for a “Determined Rate”, and your employers will be advised.

12. I am employed and have no other source of income; do I have to make a return?

You are not required to make a return; but may be requested to so by the Commissioner General (TAJ).

13. How is a Taxpayer to be treated who is both employed and self-employed?

Your employer is obligated to deduct tax from employment income (emoluments)
As a self-employed individual, it is your responsibility to determine your liability and to submit your returns on, or before the filing date of March 15th. An estimated return for the current year based on the previous year’s liability should be made and the estimated tax paid in four quarterly installments.

NB: Your returns must include income from all sources. Any tax deducted by your employer is allowable as a credit against your liability.

14. I am an employee and also self-employed. What rates of tax applies to me?

After December 31, 2014, the rate of tax applicable on Statutory Income of individuals are as follows:

For the first $557,232-	nil
For every dollar of income exceeding $557,232 -	25%

15. Are Director’s fees taxable?

These fees form a part of emoluments and tax should be deducted when fees are paid.

16. I am paid a cash allowance for housing by my employer; how should it be treated?

Where a cash allowance is paid in lieu of housing, the full amount must be added to all other emoluments and taxed.

17. If I am entitled to accommodation, should there be a contract between my employer and the landlord?

Yes, there needs to be a written contract between your employer and the landlord.

18. If an employee is entitled to accommodation, how should it be treated?

Where an employer provides an employee with living accommodation, the annual value of the accommodation should be determined by the Commissioner General. The annual value to be taxed is the market value of the accommodation (annual value of rent receivable in the open market).

19. I own a home and my employer should provide accommodation; can I enter into a contract as Landlord with my employer?

Yes, you can enter into a contract with your employer as landlord. However, where the emoluments of an employee include the provision of living accommodation and the employer provides this consequent to a Tenancy Agreement between himself and the employee, any amount payable under the agreement should be taxed at the rate of 25cents in the dollar.

20. I live in a house owned by my employer, should I be taxed on this benefit?

Yes, you should be taxed on the full market value of the benefit. That is the annual value of rent receivable in the open market.

NB: The annual value of such accommodation should be determined by the Commissioner General.

21. I’m employed to an exempt organization who provides me with accommodation, how should I be taxed?

Where the employee occupies premises owned or operated by any exempt body as defined in

Section 12(h) of the Income Tax Act; the income tax is computed on thirty percent (30%) of the gross emoluments excluding the cost/value of the accommodation.

Example:

Salary $100,000.00

Rent Benefit $ 40,000.00

Taxable Benefit $100,000.00 x 30% = $30,000.00

22. The nature of my employment requires me to live on the employer’s premises or in close proximity, how should I be taxed?

Where the employee is provided with accommodation on the same premises where the employment is exercised or resides elsewhere and it can be established that it is necessary for the employee to have that accommodation for the exercise of his employment; the taxable value of the accommodation shall not exceed thirty percent (30%) of his gross emoluments excluding the cost/value of the accommodation.

23. I am a landlord in receipt of rental income, what expenses am I entitled to?

You are entitled to expenses, wholly and exclusively incurred in earning this income e.g. payment of land/property tax, insurance, repairs and interest on mortgage repayments - not principal.

24. I am provided with a motor vehicle by my employer, how will this be treated?

Provided the vehicle is used for both private and business purposes, the value of the benefit accruing to the employee will be as set out in the Schedule of the Income Tax Act and taxed accordingly. In the event that the motor vehicles are leased, the employer must obtain the age and original cost of these vehicles to determine the benefit to be taxed on the employees concerned. (See Motor Vehicle Allowances - Appendix 11, Regulation 2)

25. I own a motor vehicle which I use to perform official duties, and I receive a traveling allowance. Is this taxable?

Where traveling is paid in cash to an employee, in which the allowance represents a reimbursement of expenses incurred in the performance of duties, and the Commissioner General is satisfied that it is reasonable, permission may be given for payments to be made without the deduction of tax.

26. My office provides me with a credit card, which is used for both private and business purposes; how should this be taxed?

Each time the card is used for private purposes - namely the purchasing of goods or services or providing money - the employee is to be treated as having received emoluments equal to the expense incurred by the person providing the card. The expense incurred by the employer must be reduced by any portion made good to him by the employee.

27. Is an entertainment allowance taxable?

Yes; Where the Commissioner General is satisfied that the expenses were incurred wholly and exclusively in acquiring the income, the amount so determined will not be taxed.

28. I am employed in the Financial Industry and receive a loan at a concessionary rate. Are there any tax implications?

Yes, there are. Effective October 1, 2002 employees in specified Financial Institutions, (see below), are liable to pay tax on the difference in interest payment between the concessionary rate and a prescribed rate of 14% arising from any loan exceeding $1,500,000. The tax is deductible under the PAYE system.

Specified Financial Institutions - Section 5 (A) of Income Tax Act.

Bank of Jamaica
Merchant Banks
Development Banks
Insurance Companies
Building Societies licensed under the Building Societies Act
Trust Companies and
any other institution licensed under the Banking Act or the Financial Institutions Act, as the case may be.

Only loans up to a maximum of $1,500,000, if used for the following purposes will be exempt:

purchasing house for owner occupancy
purchasing a motor vehicle, for private use
purchasing land
education
training
emergency needs (compassionate loan); and
furnishing of residence for owner occupation

29. I am employed in the Hotel Industry and I receive gratuity payments. Am I entitled to Income Tax relief on these payments?

Yes. Effective 1st January 1992, income earned from an Approved Gratuity Scheme of a licensed Tourist accommodation has granted a relief from Income Tax - subject to the limitation that , the total amount for distribution under an Approved Gratuity Scheme, in any one year of assessment, must not exceed ten (10%) of the billed sales.

NB: Effective July 1, 2009 the maximum non-taxable benefit to any individual should not exceed $29,104 per annum. Employees earning taxable emoluments of $500,000 or more, no longer benefit from relief on gratuity payments.

30. Should a Prescribed Person deduct tax from my interest income?

Yes, interest from a deposit or an investment of money paid, or credited, to a depositor by a prescribed person will be subject to a Withholding Tax, at the rate of 25 cents in the dollar for individuals, and 33 1/3 cents in the dollar for Companies, and other ‘body of persons’.

31. I am a Prescribed Person: Who do I make payments to and when do I make payments of

deductions from Interest Income?

The tax deducted must be paid over to the Commissioner General (TAJ), at any of the Revenue Services Centre or Tax Offices island wide by the 14th day of the month following that in which the payment or credit was made. Additionally, a quarterly return must be submitted to the Commissioner General (TAJ) by the 15th day of March, June, September and December accompanied by supporting documents.

E. PENSIONERS & NON-RESIDENT INDIVIDUALS

1. Are there Exemptions for Pensioners?

Yes.

(a) A person receiving a pension from a Statutory Pension Scheme, or from a Superannuation Scheme - approved by the Commissioner General (TAJ) - will if he/she is less than 55 years old, be exempt to a maximum of $80,000.00 of pension income only.

(b) If that person is 55 years and over, or permanently incapacitated, he/she will be exempt from tax on $80,000 of income from pension and any other source.

In addition to the above benefits, Pensioners resident in the Island, are also entitled to the following threshold nil rate (tax free) amounts

Income Tax Threshold ($) 2005 - 2015

2005	$144,768.00
2006	$193,440.00
2007	$193,440.00
2008	$196,872.00
2009	$270,504.00
2010	$441,168.00
2011	$441,168.00
2012	$441,168.00
2013	$507,312.00
2014	$507,312.00
2015	$557,232.00

NB: From 1994 to present, for Golden Agers (persons 65 years and over), receive an additional exemption of $80,000;

2. I am an elderly person, am I entitled to any Exemptions?

Yes you are. An individual aged sixty-five (65) years and over will be exempt from tax on $80,000.00 of his income from all sources, and an additional $80,000.00, if he is a pensioner. (A total Tax exemption $160,000.00)

In addition to these exemptions if you are a resident, you are also entitled to the threshold nil rate (tax free income)

3. I am a non-resident Pensioner. Am I entitled to any exemptions and tax-free amounts?

As a non-resident pensioner, you are not entitled to the Pensioner’s exemption, or the nil rate amounts (tax-free). You can however benefit from the age relief.

4. I am a non-resident individual and I have income in Jamaica. What rate of income tax applies?

From 1993, 25% of your Statutory Income. A non- resident individual residing in a country which has a Double taxation Treaty with Jamaica is subject to the following rates of income tax. (See Double Taxation Treaty Rates)

Notes

Portfolio Investments - investments by an individual or small investment by a Company.
Substantial Holdings - direct substantial investment by a non-resident company in the company paying the dividends

Members States of Caribbean Community

Antigua & BarbudaBarbadosBelizeDominicaGrenadaGuyanaJamaicaMontserratSt LuciaSt. Vincent & the GrenadinesTrinidad & Tobago

Signatories to the Caribbean Community Treaty;

BarbadosJamaicaBelizeSt. Vincent & the GrenadinesDominicaSt. LuciaGrenadaAntiguaSt. Kitts & NevisTrinidad & Tobago

NB: Non- resident individuals are not eligible for the nil rate (tax-free income)

5. I am not liable to pay tax on my interest income. How do I obtain an exemption and, or a refund of tax deducted?

Apply to the Commissioner General (TAJ) for an exemption or a refund. Where the Commissioner General is satisfied that the individual depositor is not liable to Income tax -

a) a certificate of exemption will be issued to the individual and or

b) a refund any tax which was deducted will be made.

For individuals to obtain an exemption or a refund the prescribed form has to be completed, and the relevant documents attached. (Form 1R for residents and Form 1N for non– residents)

F. OBJECTIONS:

1. How does a Taxpayer object to an Income Tax Assessment?

Objections must be done in writing to the Commissioner General (TAJ) stating the specific grounds of objection within thirty days from the date of service of the Notice of Assessment.

2. What happens if I have further objections to the findings of the initial Objections?

The case may be taken to the Commissioner Taxpayer Appeals, in the Ministry of Finance and Planning. If you are still dissatisfied the matter may then be taken to the Courts.

G. TREATMENT OF DISABILITIES:

1. I am physically disabled. Am I entitled to any tax exemptions?

Yes; the law provides for any person suffering from a permanent physical or mental disability, but who is capable of being gainfully employed to be exempt from Income Tax on emoluments. The individual must however be certified as being disabled by the Minister responsible for Social Security, on the advice of the Chief Medical Officer, Ministry of Health.

H. CONTRATOR’S LEVY

1. How is Contractor’s Levy treated under the law?

The levy can only be applied as a tax credit to reduce the income tax payable for that year in which the levy was paid.
Where there is no tax payable, the amount deducted as Contractor’s Levy cannot be claimed as a refund or carried forward as a credit against future tax liabilities.
Where the Contractor’s Levy exceeds the income tax payable, the excess cannot be refunded or carried forward as a credit against future tax liability.

I. GENERAL

Appendix B; Regulation 12

Employees entitled to relief in respect of uniform & laundry allowance.

Members of the Jamaica Constabulary Force, Island Special Constabulary Force and the Jamaica Defense Force
Members of the Jamaica Fire Brigade
Persons registered under the Dental, Medical, Opticians, and Veterinary Acts, Professions Supplementary to Medicine Act, and Nurses and Midwives Act.
Porters employed to hospitals
Correctional Officers
Attorneys-at-Law
Resident Magistrates
Judges
Legal officers in the service of the Government of Jamaica, whose job requires them to be robed in court.
Customs Officers
Air Traffic Controllers
Postal workers employed in the delivery of mail
Teachers required to wear protective clothing
Drivers & conductors of public passenger vehicles
The crew of any aircraft or ship
Port workers
Attendants at petroleum filling stations
Messengers
Drivers
Watchmen
Private security Guards
Cleaners
Gardeners
Workers employed in the hospitality or manufacturing industry, restaurants, Agriculture, Mining or in refrigerated facilities.

Other employees approved by the Commissioner General having regard to paragraph 1(B) of the provision to Section 5(1) ( c) of the Income Tax Act.

Capital Allowance Rates

Motor Vehicle Allowances – Regulation 11

Original Cost of Motor Vehicle ($)	Age of Motor Vehicle
(a) Under 5 years	(b) 5 years or more
Usage During Year
Up to 50% Private Use ($)	Over 50% Private Use ($)	Up to 50% private Use $)	Over 50% Private Use ($)
Up to 300,00	40,000.00	48,000.00	30,000.00	36,000.00
Over 300,000 - 700,000	50,000.00	60,000.00	40,000.00	48,000.00
Over 700,00 - 1,000,000	75,000.00	80,000.00	60,000.00	65,000.00
Over1,000,000 - 1,500,000	90,000.00	100,000.00	72,000.00	80,000.00
Over 1,500,000	120,000.00	140,000.00	98,000.00	100,000.00
Example: Original cost of motor vehicle over $300,000 - $700,000 under 5 years old and up to 50% private use. Taxable benefit on motor vehicle $50,000.00 Tax thereon 25% per annum $12,500.00

Penalties for Infringement of the Income Tax Act

OFFENCE	PENALTY
Failure to certify information re connected persons or willfully giving a false certificate.	Fine of $20,000.00 or term of twelve (12) months.
Failure to pay over tax deducted at source.	Fine not exceeding $1M, or treble unpaid tax, or term not exceeding twelve(12) months in default of payment.
Failure (of persons) to deliver lists by persons in receipt of taxable income belonging to others.	Fine not exceeding $1M or term not exceeding twelve (12) months.
Failure to deliver Declaration of Income tax by 15th march, and failure to comply within 30 days after service of notice by Commissioner.	Penalty of not more than $10000.00 determined by the Commissioner and further penalty of $1000.00 daily for each day default continues.
Failure to file returns.	Fine not exceeding $*10,000*.00 or terms not exceeding twelve (12) months.
Failure to give notice of income in excess of tax free allowance ($441,168.00).	Treble the tax which he ought to be charged plus penalty of $5,000.00.
Failure to file return of trades carried on by two or more persons jointly	Fine not exceeding $10,000.00 or term not exceeding twelve (12) months.
Failure of person to comply with notice to file returns served on him by Commissioner.	Fine not exceeding $10,000.00 or term not exceeding twelve (12) months.
Knowingly and willfully aids and abets, incites another person to make or deliver a false or fraudulent account, statement or declaration of or concerning any profits.	Fine not exceeding $100,000.00 or term not exceeding 2 years.
Refusing or neglecting to give evidence in pursuance of a notice served on him to produce books or documents.	Fine not exceeding $10,000.00 or term not exceeding twelve (12) months.
A responsible Officer failing to notify Collector within fifteen (15) days after end of month of outstanding balances of income tax payable pursuant to the Regulations.	Fine not exceeding $10000.00 or term not exceeding six (6) months and $2,000.00 daily for continuing offence after conviction.
Knowingly making false statements or false representations in any return statement or declaration	Fine not exceeding $100,000.00 and treble tax which he ought to be charged or term not exceeding five (5) years.
Person by himself, or by any person in his employ, obstructs molest or hinders an Income Tax Officer in the execution of his duty	Fine not exceeding $10,000.00 or treble tax which he ought to be charged or term not exceeding five (5) years
Failure to maintain proper books and records	$10,000 or term not exceeding 12 months
Failure to notify the Commissioner of transfer of machinery before three (3) years, which is subject of the grant of a special Capital Allowance.	Fine not exceeding $10,000.00 plus three time the amount of special capital allowance.
Transfer outside of the Island of the residence of a business or a Company located in the island without the permission of the Minister of Finance.	Fine not exceeding $40,000.00 or term of imprisonment not exceeding two years, or both.
Failure to pay over tax deducted at source.	Employers are liable to an increase of tax (penalty) of 50% per annum on all outstanding PAYE deductions and or Fine not exceeding $1M or treble unpaid tax whichever is the greater or a term not exceeding twelve months in default of payment.

REMINDER:

a) Individual Returns -	IT01
b) Organizations Bodies Corporate -	IT02
c) Organizations - Unincorporated Bodies Other than Life Assurance -	IT03
d) Life Assurance Companies -	IT04
e) Individuals PAYE & Pensioners -	IT05
f) Employers Annual Returns -	SO2/IT06
g) Estimated Returns/Declaration of Estimated Income -	IT07

Employers with part-time workers are reminded to withhold tax at 25% of the gross amount, and to advise these workers with no other employment to contact the Tax Administration Jamaica (TAJ).

Disclaimer: This information is only a Guide and is not a substitute for the Income Tax Act and other relevant Legislation. In any area of conflict, the final authority is the Income Tax Act & Regulations.

Income Tax - Everything you need to know.

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