Serika Sterling | Heed the returns
OP-ED CONTRIBUTION: TAX FILING
Jamaica taxes its residents on their worldwide income from all sources and uses a self-assessment tax system, where taxpayers must calculate their own tax liability.
Income tax returns are due by March 15 each year, for the immediately preceding year. That means the income tax return for 2018 is due by March 15, 2019. If you are unsure whether you should be filing an income tax return this year, here’s how to make that determination.
Once you are on the payroll of more than one employer, you are required to file an income tax return. Though your employers may have already deducted taxes and contributions from your income, you are still required to file an individual income tax return, declaring all your income and taxes. This will determine if you are entitled to a refund or have additional taxes to pay.
It’s important to note that filing this income tax return is not the responsibility of your employer. If you are self-employed or earn additional income outside of your employment, you are required to file an income tax return. This is applicable whether or not you have a registered business or a formal business structure.
Therefore, whether you are earning income from selling shoes out of your trunk, renting out your car part-time or as a virtual assistant to a boss in the United States, you are required to declare the income and pay any relevant taxes.
You may have registered an entity but never started operations, or discontinued operations without deregistering with the Companies Office of Jamaica or closing your tax accounts with Tax Administration Jamaica, TAJ. In both cases, you are still required to continue filing annual income tax returns until you have removed the business name or company from the Companies Office Register and closed all its tax and statutory accounts with TAJ.
You are required to make all relevant tax filings and clear all taxes owed before you can close the tax accounts.
Misconceptions and consequences
Although non-profit organisations and approved charitable organisations may be exempt from a number of taxes, including income tax, they are still required to file an annual income tax return. The type of tax return form used is dependent on your charitable status. Your tax accountant or TAJ’s Taxpayer Education Unit can provide guidance.It is a common misconception that your financial year, for tax purposes, follows the date of your business or company registration or the date you began formal operations. This is not the case.
Based on local law, your financial year for tax purposes follows a calendar year, regardless of which month the entity was registered or when operations began. For example, if you registered your business or company in July 2018, your financial year for tax purposes remains January to December, and you would still be required to file an income tax return come March 15, 2019, for the year 2018.
To change to an alternate financial year for tax purposes, you must seek approval from TAJ’s Commissioner General, in writing.
Foreign branches and certain non-resident corporations carrying on trade or business activities in Jamaica are required to file an annual income tax return, locally. The basis on which an income tax return filing is required by a non-resident or foreign branch is intricate. As such, you should engage a tax accountant for guidance.
What happens if you don’t file an income tax return? Under local law, a taxpayer can incur penalty and interest, have their income garnished, be taken to court and in extreme cases, imprisoned for non-compliance. This can have a huge impact on your personal life, the business’ cash flow, and may even lead to bankruptcy. Non-compliance can also affect your day-to-day operations and limit business opportunities, as you will not be able to obtain a Tax Compliance Certificate, TCC – which is needed to import goods, bid for certain contracts, apply for loans or grants, open a bank account, among other important business processes.
You must file an income tax return in order to take advantage of all the credits and deductions available to you and avoid penalties and interest. Understanding the local tax laws and how they apply to your unique situation can be a complex endeavour. If you lack the necessary expertise internally, engage the services of a tax professional.
Serika Sterling is a Certified Public Accountant and owner of Senior Accounting Services.