A new income tax threshold of $592,800 per annum comes into effect in the New Year on January 1, 2016, moving up from the current tax-free amount of $557,232.

The increase in the threshold means that the corresponding tax-free portion to be used by employers, as of January 2016, in making periodic payments is as follows:

$11,400.00 Weekly
$ 22,800.00 Fortnightly
$ 49,400.00 Monthly
$148,200.00 Quarterly

Employers are advised to make the necessary adjustments to their payroll system to reflect the increase in the threshold, so that all employees may benefit from the increase.

In addition to employees, all individuals resident in Jamaica, whether self-employed or pensioners will also benefit from the increase in the income tax threshold.

With the increase in the threshold, the tax paid per annum by each individual will reduce by $8,892.00 (i.e. 592,800 – 557,232 = $35,568 x 25%), while the net effect for each individual per quarter will be a reduction in tax of $2,223.00 and $741.00 per month. The public is reminded that income in excess of the threshold will continue to be taxed at 25%.

Self-Employed individuals are advised that the new threshold of $592,800 is to be used to file their estimated income tax return for the 2016 year of assessment, due March 15 and to make payments for the same year in four equal instalments by March 15, June 15, September 15 and December 15 of each year. However, the threshold of $557,232 is to be used in filing the annual tax return for year of assessment 2015, which is also due on March 15, 2016. Pensioners and persons sixty-five and over are reminded that in addition to the threshold they are entitled to a pension exemption of $80,000 and an age exemption of $80,000 respectively.

Source: Tax Administration Of Jamaica

Excerpt from JCC bulletin d/d 10/12/15.

KPMG has shared the following valuable tips on taxation of gifts to staff, clients and charities during the Christmas season…

During the holiday season businesses are bursting with excitement, decorating the office, rewarding employees who have performed well, giving gifts to valuable customers and planning that end of year staff function. We thought it appropriate to provide general guidance for common tax questions that come up at this time of year.

Cash awards, gift vouchers and non–monetary gifts to staff members

It is customary for employers to treat their employees with a cash award, gift voucher or non-monetary gift at Christmas time. These gifts may attract the standard payroll taxes and statutory contributions.

Employees will generally be taxed on cash awards. The same treatment will be applied where a gift voucher or non-monetary gift (for example, appliances, paintings and jewelry) is given to the employee (for example, for a long service award or other performance based award).  The employee may be taxed on the full value of the voucher or the cost incurred by the employer in providing the gift.  Companies may wish to reduce the tax cost to the employee when giving these gifts and should consult with their tax advisors for any suggestions to achieve this.

The costs incurred by the company in providing the gifts will be tax deductible for income tax purposes. However, the General Consumption Tax (“GCT”) on the expenses incurred in providing the gift is generally not recoverable as an input tax credit or a refund.

In addition, if the gifts are taken by the business owner or family members for personal use, the GCT costs of those gifts cannot be claimed as input tax credits or a refund. Further, where the business owner takes items from inventory which form part of his taxable activity, for personal use and/or gifts to family members, the business owner must account for output GCT on the cost of the item.

Staff appreciation function

Many companies tend to have a staff party, luncheon or other function at Christmas time. A company will incur some GCT on the items for the staging of such an event, such as rental of the venue, catering, decorations etc. While the expenses are deductible for income tax purposes, the GCT on the expenses may not be recoverable as an input tax credit or a refund.

Gifts provided to customers

It is customary for companies to give their most valuable customers gifts at this time of the year. This is ordinarily done to maintain the business relationship. The costs incurred to provide such gifts are deductible expenses in arriving at the company’s income tax liability. The GCT on the expenses, would also be recoverable as input tax credits.

Charitable contributions

Most companies tend to be engaged in some form of charitable contribution throughout the year, however, this is usually done in a more expansive way at this time of the year. To be tax deductible for income tax purposes, charitable contributions must be made to a registered charitable organization. It should be noted that the maximum amount of aggregate charitable contributions allowed as an income tax deduction for the tax year is restricted to 5% of the donor’s taxable net profit (excluding the contribution). This benefit is available to companies and self-employed persons alike. With some planning, it is possible to make generous donations while gaining tax benefits during the season.

Jamaica Chamber of Commerce (JCC)
Newsletter Jan. 8, 2016.

Transfer  pricing involves  the  price  that  one  department  or  subsidiary  of  a  Group  of Companies charges for the goods or services that it provides to another department or subsidiary of the same Group. The Organization for Economic Cooperation and Development (OECD),in an  effort  to  provide  guidance  as  to  how  to  value  cross.. .

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Please be reminded that Environmental Protection Levy (EPL) Returns are now due for manufactured goods and goods imported from CARICOM (i.e., with the exception of food production for immediate consumption)..Please note that if the EPL is included in the price of the product, GCT becomes payable on the full selling price including the  EPL.

I have attached some useful reading material on TAJ recent Updates and you will notice that online filing are required for additional services including monthly SO1 filing.

 Please note that the introduction or RAiS will require taxpayer's to be more vigilant about record-keeping, accuracy, timely payments and reporting as the system is designed to immediately identify anomalies and impose onerous interest and penalties and trigger audits and investigations..

As part of our tax management and tax risk assessment process we ask that you insist on getting periodic statements from major suppliers and ensure that all import documents and any dealings with government, insurance companies etc. are accurately recorded and source records kept, as the TAJ has advanced their third party verification process and we want to ensure that the risk of penalty for our clients is very low.

• Technical_Note-Environmental_Levy_2015.pdf
• Tax-Administration-Jamaica-Updates.pdf
• Environmental _Protection_Levy.pdf

Joan Dallas
Managing Director/CEO