Understanding the new property tax regime
In recent times there has been much concern and confusion as it relates to the adjustments in the new property tax rates for the period 2017-2018. This article is aimed at providing some insight in respect of the law governing property tax in Jamaica.
Authority -The Property Tax Act gives the government the authority to charge property tax on all property in Jamaica. All property tax collected is required to be credited to the Parochial Revenue Fund, which is to be used by the government for the general maintenance of the parochial road network, including but not limited to, repairing damaged parochial roads, street lightening and garbage collection.
Applicable penalty and interest payable for late payments - Property tax becomes due and payable on the 1st day of April in each year for the 12 calendar months commencing on that date. Failure to pay property tax on the date it becomes due will result in a penalty of 10% per annum, which will be added to the outstanding property tax. The taxpayer has the option to arrange to pay the property in quarterly instalments. A payment (or instalment) made at any time within the month of April (July, October or January) is deemed compliant and will not attract the 10% penalty. However, if the property tax remains unpaid for 30 days after the collection date, in addition to the 10% penalty, late payments will attract interest of 15% per annum on the property tax due, not the penalty.
2017-2018 Rates - Effective April 1, 2017 new property tax rates were introduced by the government. Taxpayers saw a decrease in the 2013 rates, which were 1.5% to 2.0%. The 2017-2018 rates comprised of a flat rate of $1000.00 for land valued up to $400,000.00 and thereafter a range of 0.8% to 1.3% which applies progressively to eight bands of unimproved values. While the reduction in tax rates appeared to be good news to taxpayers, this was far from reality for a significant percentage of taxpayers. Far more controversial than the new reduced progressive rates was the government’s decision to move from the 2002 Valuation Roll to adopting the 2013 Valuation Roll, which was completed in September 2013 and reflects values of properties as at July 1, 2013.
Property Tax is assessed on the unimproved value of the land (which is the reasonable value at which a seller could offer his land for sale without taking into consideration any improvements, physical additions or alterations to the land, such as buildings). Many taxpayers are of the opinion that the unimproved value attributed to their land is exorbitantly higher than what he/she could reasonably fetch on a sale of land. The general public dismay and dissatisfaction in the new property tax led the government to re-evaluate the recently introduced rates.
On the 11th of April, the Minister of Finance and Public Service, the Honourable Audley Shaw tabled the Property Tax (Amendment) No. 2 Act 2017 which is aimed at making retroactive to April 1, 2017 the changes to the proposed tax rates. The government proposed to retain a flat rate of $1000.00 tax on all property valued up to $400,000.00 and to also re-introduce a progressive tax regime with eight bands now ranging from 0.5% to 0.9%. The anticipated effect of this further reduction in the tax rates, as stated by the Minister, is that 58% of taxpayers will see a reduction or no change in their property tax over what was assessed for the last fiscal year. However, properties with values of over 20 million dollars will still see significant tax increases.
Below we have outlined the difference in property tax for fiscal year 2016-2017 and 2017-2018 for four different properties.
|Properties||Valuation for the period 2016-2017||2016-2017 Property Taxs||Valuation for the period 2017-2018||2017-2018 Property Tax|
|Strata located off Hope Road – Golden Triangle||$47,600,000.00 (representing the total value of land 12,039 sq. metres)||$15,906.36 (unit entitlement 222.00sq. metres)||$270,000,000.00 (representing the total value of land 12,039 sq. metres)||$43,972.21 (unit entitlement 222.00sq. metres)|
As can be seen, the rate of the property tax increase for all but the smaller Portmore lot is still considerable and may well lead to continued public dissatisfaction. If the increase had been spread over more than one tax year the public outcry may have been lessened.
Who will be liable to pay? It is important to note that the Property Tax Act provides that property tax is payable by any person in possession of the property at the date the property tax becomes due, regardless of whether or not that person(s) is the registered proprietor of the land. If more than one person is in possession, the Collector of Taxes has authority to enforce payment proceedings against all or any of the persons in possession or seize and sell their goods in order to recover any outstanding property tax, penalty and interest. Further, property in arrears for non-payment of property tax may be forfeited to the Government of Jamaica.
Minister’s Discretion - The Minister has the power under the Act to remit the whole or any part of the property tax. Persons having difficulties paying property tax may enter into arrangements to pay in monthly, quarterly, semi-annually or annual installments. Taxpayers experiencing genuine hardship, for example, persons over the age of 65 years, pensioners, persons suffering from disabilities and financially challenged and/or unemployed persons may apply for Special Discretionary Relief through any of the Municipal Corporations, such as the KSAC. While the Relief will no doubt provide necessary assistance for many, it is not clear whether it will apply only to the person who applies for the relief or to the property tax itself or what will happen in circumstances where there are one or more occupiers in possession of the property and relief is only applied for and/or granted to one occupier? Will the other occupier still be liable for the payment of property tax in part or whole? It is also important to note that although no timelines for the granting of relief have been indicated, the Act provides no waiver of the penalty and interest that will apply if relief applicants do not obtain the relief or pay the tax due before the end of April (July, October or January, as the case may be). Consequently the speed with which relief applications will be processed is a real concern of many taxpayers.
In addition to the above, taxpayers may also seek the following reliefs and exemptions:
- Statutory Relief - granted in instances where the surrounding area may have significantly developed thereby resulting in the valuation for the zone significantly increasing, though the taxpayer has not changed the use of their property despite the developments in the area.
- Agricultural Derating - granted where land is being used primarily for farming purposes. Individuals can apply to the Land Relief Board for the value of the land to be reduced by as much as 50%.
- Exemptions - The Property Tax Act also provides exemptions for certain types of property including; buildings used for religious purposes, schools and hospitals etc.
Objections and Appeals - If you are concerned about the 2013 valuations you will only have 60 days after service of the notice of valuation to lodge an objection to challenge the valuation. The three main areas of challenge prescribed are:
- challenging the value assessed as at July 1, 2013;
- challenging the lands included in the valuation; or
- challenging the fact that the person named in the notice is not the owner of the land.
Here are the steps to take:
- Await the service of the Notice of Valuation – In the mean time we suggest that taxpayers pay either property tax as if the unimproved value of the land were assessed at 75% of the 2013 value or the tax on the value felt to be more accurate, whichever is greater.
- Serve a Notice of Objection in the prescribed form at the Commissioner of Land Valuations within 60 days of receiving the Notice of Valuation, if the valuation is felt to be excessive. We recommend that you obtain and submit a valuation from a reputable valuator in order to support your objection.
- Await the result of the Objection filed. If the valuation is altered, an adjustment will be done and amounts paid in excess will be refunded as a credit against future tax. The amounts underpaid will be recoverable as arrears. Note that interest shall be charged on any amount underpaid from the collection date until the date of payment at the rate of 8% per annum and such interest may be added to the amount payable as land tax and may be collected and recovered.
- After the Commissioner gives a decision, you again have 60 days to appeal to the Revenue Court if you wish, upon payment of a security for the due prosecution of the appeal, which is reimbursable if you appear in person or by an attorney-at-law.
- If you are still not satisfied, a further appeal to the Court of Appeal is then possible within 60 days of the decision of the Revenue Court.
If you are in doubt about how to lodge an objection we recommend that you seek the assistance of an attorney-at-law. The procedure, if not carried out correctly and in a timely manner, may result in your losing the right to object on appeal.
Alexis Robinson is an Associate at Myers, Fletcher and Gordon in the Litigation Department. She may be contacted at firstname.lastname@example.org.
Natasha Rickards is an Associate at Myers, Fletcher and Gordon in the Property & Probate Department. She may be contacted at email@example.com.
This article is for general information purposes only and does not constitute legal advice.