Sat | Oct 20, 2018

TAJ woos grandfathered companies to new tax incentive regime

Published:Friday | July 3, 2015 | 12:00 AM

Tax Administration Jamaica confirmed that it has been reaching out to companies that have been allowed to "live out" their waivers, even after tax reform, to give up those subsidies and migrate immediately to the new tax regime.

The TAJ is especially targeting the hotel sector, whose players were given up to 15 years of waivers under old laws.

The Fiscal Incentives Act of 2013 and other legislation that reformed the tax

laws allowed taxpayers to opt for 'grandfathering' - that is, living out their previously approved benefits - but which meant they could not access the new incentives created by the new legislation.

TAJ has not said how many years of grandfathering remains on average. Sources at the agency said a report has been generated on the outreach project, but efforts to learn its contents have been unsuccessful.

Camile Needham, the executive director of the Jamaica Hotel and Tourist Association (JHTA), said in June that discussions between the Government and individual hoteliers were ongoing.

She said that JHTA, as a body, could not take a position on the issue, as each hotelier had to decide what was best for them. Requests for comment from resort companies have gone unanswered.

Under the Hotels (Incentives) Act and the Resort Cottages (Incentives) Act, for example, grandfathered resort companies pay GCT at the standard rate of 16.5 per cent. At migration to the new fiscal regime, the GCT charge falls to 10 per cent.

Depreciation allowances

The new laws also offer depreciation allowances, capital development tax breaks and duty-free allowances on intermediate goods. And a new employment tax credit, which took effect on January 1, 2014, allows designated employers to claim a credit against income tax, based on statutory payroll deductions. Employers, on filing of their annual returns in March of each year, can claim a rebate from statutory deductions. The rebate claimed should be no more than 30 per cent of profit reported.

In April, Minister of Tourism Dr Wykeham McNeill said the reform of tax laws had streamlined incentives for all sectors leading to more local properties qualifying for relief. The number of properties that can claim relief on capital goods and other inputs have climbed to 400 under the new regime, up from 100.

Under the grandfathering arrangements, companies listed on the junior market before January 1, 2014 and had got 10 years of tax subsidies are allowed to complete their incentive periods.

Companies listed on or after January 1, 2014 are eligible for full waivers of income tax over the first five years of listing. The company must remain listed on the exchange for at least 10 years, otherwise the waived taxes must be paid back.