“The subject whether poor and humble or wealthy and noble, has the legal right so to dispose of his capital and income as to attract upon himself the least amount of tax.” This famous quote was used by Lord Atkin in the house of lords in 1936. In 2014 the government of Jamaica passed two key pieces of Legislation that are collectively known as the omnibus legislation, namely, the Fiscal Incentives (Miscellaneous Provisions) Act, 2013 (“Fiscal Incentives Act”) and the Income Tax Relief (Large-Scale Projects and Pioneer Industries) Act.
Stop 1 Employment Tax Credit
One of the main changes coming out of the Fiscal Incentives Act was the addition of section 32A to the Income Tax Act. Section 32A provides for an Employment Tax Credit and states that a person, other than a company that is regulated by the Financial Services Commission, the Office of Utilities Regulation, the Bank of Jamaica, or the Minister of Finance, is entitled to claim a tax credit against income tax payable in the amount equivalent to the total payments of Education Tax, Human Employment and Resource Training Act (“HEART”) contributions, National Housing Trust (“NHT”) Contributions, and National Insurance Scheme (“NIS”) contributions paid, in respect of, or on behalf of employees, in any month within the tax assessment period.
The amount of Employment Tax Credit that may be claimed by an employer in respect of any year of assessment is limited to 30% of any tax payable by the employer on income, profits or gains of the employer arising from the carrying on of the trade, profession or vocation by the employer and the rental by the eligible person of a hotel or resort cottage that is licensed as a tourist accommodation under the Tourist Board Act. An individual can also claim the benefit of the employment tax credit if the person can account for and can prove payment of all amounts the person is liable for under the Education Tax Act, National Housing Trust Act and National Insurance Act in his/her capacity as a self-employed person.
Stop 2 Income Tax Relief (Large-Scale Projects and Pioneer Industries) Act
Under the Income Tax Relief (Large-Scale Projects and Pioneer Industries) Act, the Minister of Finance (the “Minister”) may designate a project as an approved large-scale project, or an economic activity as an approved pioneer industry. A company that desires to be designated a participant in an approved large-scale project or pioneer industry must apply to the Minister for a certificate of approval.
Before making an order to designate a project as an approved large-scale project, the Minister must be satisfied that (i) the project is consistent with the strategic priorities of the Government of Jamaica (ii) the projected amount of capital investment or jobs created in Jamaica will not be less than the amounts prescribed by the Minister which, as of the date of writing, has not yet been prescribed. (iii) that it is likely to make a substantial contribution to Jamaica’s economic growth and national development.
Before making an order to designate an economic activity as a pioneer industry the Minister must be satisfied that the economic activity (i) is consistent with the strategic priorities of the Government of Jamaica; (ii) is not being carried out in Jamaica on a substantial commercial basis and involves the commercial application of the results of scientific research; and (iii) is one for which there are favourable prospects of it being developed so as to have a transformational impact on the economy of Jamaica.
The Minister cannot grant an order designating a project as an approved large-scale project, or an economic activity an approved pioneer industry, if it is likely to result in the estimated aggregate tax expenditure incurred during that financial year exceeding 0.25 percent of the Gross Domestic Product of Jamaica for the preceding year.
These legislation can be used by entrepreneurs to secure a benefit for their next big venture or to alleviate some of the burden on the cashflow. At this juncture it will be fitting to end with a quote from Lord Tomlin form the same case which started our Journey on the “Omnibus”:
“Every Man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”
Luke Phillips is an Associate at Myers, Fletcher and Gordon. He may be contacted at email@example.com or through the firm’s website www.myersfletcher.com.
This article is for general information purposes only and does not constitute legal advice.