What is a transfer?
To paraphrase the definition of section 2 of the Transfer Tax Act (the “Act”), A transfer means any transmission of legal or equitable interest in property from one person to another by way of sale, gift, exchange, grant assignment, surrender, release, or other disposal, and includes a transfer by or at the order or direction of a court of competent jurisdiction or by way of compulsory acquisition and “transferor” in relation to such a transfer of property, means the person from whom the property is so transferred.
Obligations of the Transferor
Under the Act the Transferor is responsible to pay transfer tax on the transfer of any property. Transfer tax is usually assessed at two percent (2%) of the amount of money paid as consideration (being the price paid for the property) or the monetary value of non-money consideration (being the services or other valuable property rendered in exchange for the transfer of the property).
Determining Consideration under the Transfer Tax Act.
According to section 4 of the Act, the transfer of property shall be deemed to be for a consideration equal to the market value of the property in the following circumstances:
- If the person acquires the property by way of gift:
- If the transfer is by way of a bargain made otherwise than at arm’s length
- If the person acquires the property, wholly or partly, for a consideration that cannot be valued.
- If the person acquires the property in connection with his own or another’s loss of office or employment.
- If the person acquires the property in exchange for a diminution of emoluments;
- If the person acquires the property in exchange for or recognition of his or another’s services or past services in any office or employment.
- Where, in the opinion of the Commissioner of Taxpayer Audit and Assessment, the amount or value of the consideration is substantially less than the market value of the property.
It goes without saying that if the consideration is greater than the market value of the property, transfer tax will be assessed as mentioned above, for 2% of the value of the consideration actually rendered. However, the Act makes an exception for the transfer of property in connection with the satisfaction of debts. Property transferred in satisfaction of a debt, where the debt exceeds the market value of the property, shall not be treated as transferred for consideration exceeding its market value at the time of such transfer but will be assessed at 2% of the market value of such property.
On the death of a person, all the property of which he was competent to dispose of at the time of his death shall be treated as if it has been transferred for a consideration equal to the property’s market value at the date of the transferor’s death. However, no transfer tax is payable on property transferred on death if the total consideration for that transfer is ten million dollars or less. If the value of the consideration is greater than ten million dollars, then no transfer tax is payable on the first ten million dollars of the consideration and transfer tax is assessed at 1.5% of every dollar of consideration over ten million dollars.
Exemptions from Transfer Tax
Now that we have narrowed down how to determine transfer tax you may be excited to hear that there are certain transactions that are exempt from transfer tax. These include, among others:
- Any transfer by the Government of Jamaica other than a transfer of property out of or into the National Insurance Fund;
- Any transfer by the Kingston and St. Andrew Corporation or any other Parish Municipal Council;
- Any transfer by the GOJ or any Parish Council of land which is reserved in the course of the subdivision of land and in compliance with any condition of the sanction of such subdivision under the Local Improvements Act;
- Any transfer by way of gift to a registered charity;
- Any transfer where the property so transferred is settled exclusively for a charitable purpose:
- Any transfer of securities in the course of business on the Jamaica Stock Exchange or any other recognised stock exchange.
- Any transfer or agreement for transfer of shares of investors in a registered collective investment scheme company
- Any transfer or agreement for the transfer of shares, units or other participating interests in a registered collective investment scheme.
There are also a number of transactions for which an application for relief from transfer tax may be made. These relief applications may be covered in a future article, however if you, like me, are impatient then you should contact your attorney for more information.
Luke Phillips is an Associate at Myers, Fletcher & Gordon, and is a member of the firm’s Commercial Department. Luke may be contacted via Luke.Phillips@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.