First came the extended fund facility, then the tax reform and now the birth of The Omnibus. The recently implemented Omnibus Incentive Regime is one of the many structural benchmarks established under the 48 month extended fund facility between the International Monetary Fund (“IMF”) and the Government of Jamaica. The objective of this incentive regime is to provide for a consolidated generalized incentive program that should encourage investment and consequential employment creation. The legislation enabling this regime came into force on January 1, 2014 and the Omnibus officially began its journey of transforming the corporate tax incentive landscape. How do we journey through the Omnibus? Below you will find some major ‘bus stops’ to familiarize your Omnibus journey!
1. First Stop! – What is the Omnibus?
The Omnibus Legislation simply refers to the collection of legislation aimed at achieving the primary goal; in this case corporate tax reform. The Omnibus Incentive Regime is comprised of the following:
i. The Fiscal Incentives (Miscellaneous Provisions) Act 2013; and
ii. The Income Tax Relief Act (Large Scale Projects and Pioneer Industries) Act 2013;
The effect of these Acts is to significantly amend the provisions of the Customs Act and the Stamp Duty Act and as such are to be read in conjunction with the Customs Tariff (Revision) (Amendment) Resolution 2013 and the Stamp Duty (Amendments of Schedule) Order 2013.
2. Second Stop! – What is the Non-discretionary incentive regime
This new regime requires the Government of Jamaica to cease granting incentives under what is termed as the legacy incentive legislation and instead grant incentives pursuant to the Fiscal Incentives (Miscellaneous Provisions) Act 2013 and related Resolution/Orders after January 1, 2014.
Before the Omnibus members of the business sector had to request waivers which were obtained under various incentives or at the discretion of the Minister of Finance. One of the primary objectives of the Omnibus regime is to eliminate the former sector-based incentive programme and implement a non -discretionary regime which removes the discretionary element of the approval process and specifies which industries will qualify or continue to qualify for incentives (referred to as ‘retained incentives’).
Under the Fiscal Incentives (Miscellaneous Provisions) Act the following Acts have been repealed in order to remove the discretionary element of the former incentive regime:
• The Cement Industry (Encouragement and Control) Act,
• The Export Industry Act,
• The Foreign Sales Corporation Act,
• The Hotels (Incentives) Act,
• Industrial Incentives Act,
• The International Finance Companies (Income Tax) Relief Act,
• The Motion Picture Industry (Encouragement) Act,
• The Petroleum Refining Industry Act,
• The Resort Cottages (Incentives) Act, and
• The Shipping Incentives Act.
The new regime retains those incentives granted under the Jamaica Export Free Zones Act until December 2015, the Income Tax Act (Junior Stock Exchange) and the Bauxite Industry Encouragement Act).
The Fiscal Incentives (Miscellaneous Provisions) Act also provides for an election process whereby persons who were entitled to incentives under any of the repealed enactments are afforded the opportunity to elect to forgo the remaining entitlement in order that they may benefit under the Act.
3. Third Stop! -Additional incentives granted
Incentives for Large Scale projects and Pioneer industries
Additional tax incentives can be offered in circumstances where the Minister of Finance designates a project as a large scale project or an economic activity as a pioneer industry which would grant ‘specified’ income tax incentives to such projects or economic activities. This is provided for under the Income Tax Relief Act (Large Scale Projects and Pioneer Industries) Act 2013. This order is however subject to affirmative resolution by Parliament.
An approved large-scale project must be:
- Consistent with the Government’s strategic priorities
- Have projected capital investment or jobs created that are of a value no less than the value of the tax incentives being given; and
- Is likely to make a substantial contribution to Jamaica’s economic growth and development
With respect to a project, a prospective participant may apply to the Minister to be declared an approved participant. If the application is successful the Minister will grant a certificate of approval to the participant which will specify the tax incentives to which the participant is entitled. It is possible therefore that not all participants in an approved large scale project will be entitled to the same tax benefits.
One Stop for All! – New Employment Tax Credit Incentive
Tax compliant businesses /individuals will be entitled to a non refundable Employment Tax Credit which may be claimed against Income Tax that is payable for the year under assessment. However, the credit will not reduce income tax payable on non-trade income such as income from interest payments, dividends, capital gains or profit investment. The amount of the Employment Tax Credit is the aggregate sum of the following contributions paid by employers: Education Tax, HEART, NHT and NIS. For businesses to be eligible for the Employment Tax Credit the relevant statutory contributions and SO1 forms must be paid and filed on time including all estimated taxes and relevant tax returns.
The journey starts NOW!
Hoping on the Omnibus is intended to benefit all business persons whether you are an investor, manufacturer or small to medium sized entrepreneur. It is a great opportunity for businesses to assess the advantages of these incentives in an effort to stimulate business activity and maximize returns. Let’s prepare for the journey, plan the route ahead and Hop on the Omnibus!