January 27, 2016
BY AVIA COLLINDER Business reporter email@example.com
Claude Duncan, vice-president of investment and promotions at JAMPRO – the island’s investment promotions agency, has confirmed that companies operating as Free Zone entities, including those engaged in business process outsourcing (BPO) activities, do not pay corporate income tax, and will continue to enjoy this benefit for another four years before benefits expire under the new Special Economic Zone (SEZ) Act which has effectively repealed the Jamaica Export Free Zones Act.
Last Thursday, the Ministry of Industry, Investment and Commerce confirmed that it has on record 128 companies which currently operate under the Act, this including stand-alone entities, Free Zone companies in designated areas and Free Zone Promoters. Of this number, 57 companies are engaged in BPO activities, the MIIC said.
Under the new SEZ Act, companies will be required to pay corporate income tax of 12.5 per cent, but for existing companies this will only be effective at the end of the grandfathering period of four years, Duncan told the Jamaica Observer.
New companies can benefit under the SEZ Act (which is yet to be enacted) that offers further tax discounts for research and development and other incentives.
The new Act makes way for the designation, promotion, development, operation and management of SEZs. It also provides for the establishment of an SEZ authority and the granting of measures which attract domestic and foreign investments.
The SEZ Act is not yet enacted. Prior to the passage of the Act, JAMPRO noted on its website that the BPO industry generally accesses fiscal incentives under the Jamaica Export Free Zone Act – one of the four legislated incentives that were not repealed when the Omnibus Act, which outlines new incentives, was passed.
Companies designated with the Free Zone status will continue to benefit from duty-free importation, GCT-free importation and no requirement to pay the other port-related taxes such as the environmental levy, additional stamp duty and standard compliance fee. Free Zone beneficiaries are, however, required to pay the Customs Administration Fee (CAF).
Under the Jamaica Export Free Zone Act profits earned are free from income tax. However, qualifying companies must prove that they export 85 per cent of the goods and services produced within the Free Zone.
Under the SEZ Act, which is likely to be retroactive to January 1, 2016 when gazetted, approved occupants will be exempt from asset taxes and customs duties.
There are no taxes on dividends and none on rental of property within the zone. They can also get a tax credit against funds spent on research and development in an amount of up to ten per cent of taxable income. Telephone services and electricity will also not be taxed.
There are also discounts and exemptions on stamp duty involving the purchase or lease of property for development within the zone ranging from 50 per cent to 100 per cent.
Developers in the zones, however, must have minimum paid-up capital of US$1.5 million while occupants themselves must have US$25,000 in paid-up equity on their books.
Investment in equipment, buildings and plant for each occupant is a minimum US$50,000 during year one.
Small and medium-sized entities with the potential for high growth will be considered on a case by case basis by the SEZ authority.