Chambers Henry has compiled a list of answers to frequently asked questions we hear from our clients from time to time. Search by keywords, or click on each category below to see questions and answers.
Benefits, Allowances, and Penalties
Q. I recently resigned my job. What should I get from my Employer?
If you leave your employment within the calendar year (January to December), you should obtain parts two (2) and three (3) of the Leaving Certificate (P45). The employer will send Part One to the Commissioner (TAAD).
If you get a new job, you should give Parts two (2) and three (3) to your new employer, who will use the information on the Leaving Certificate to continue the deduction of tax for that year.
If you are not employed after six (6) weeks of leaving your job, you may apply to the Commissioner (TAAD), for an ‘unemployment refund’ using Parts two (2) and three (3), along with the completion of Forms P1 and P22, which are available from the TAAD, or any of the Tax Offices islandwide.
N.B. Employers must deduct tax on the week 1 and month 1 basis, where they have new employees during the year, and these employees did not supply them with parts 2 and 3 of the P45.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. I am employed and would like to submit my own income tax return. Am I to get any documents from my employer?
Yes, you should get your Certificate of pay and tax deducted (P24). Please note that once an employer issues a ‘Leaving Certificate’ (P45) to an employee, and that employee is not re-employed by the employer, a P24 should not be issued by this employer. However, if subsequently employed, the P24 for this employment is also required.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. How is a taxpayer to be treated, who is both employed and self-employed?
Your employer is obligated to deduct tax from employment income (emoluments).
As a self-employed individual, it is your responsibility to determine your liability and to submit your returns on, or before the filing date of March 15. An estimated return for the current year, based on the previous year’s income should be made, and the estimated tax paid in four quarterly installments.
N.B. Your returns must include income from all sources, wherever earned. Any tax deducted by your employer is allowable as a credit against your liability. A P24 should be attached.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. I am an employee and also self-employed. What rates of tax applies to me?
After December 31, 2005, the rate of tax applicable on Statutory Income of individuals is as follows:
For the first $193,440 nil
For every dollar of income exceeding $193,440 25%
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. I am a landlord in receipt of rental income. What expenses am I entitled to?
You are entitled to expenses, wholly and exclusively incurred in earning this income, e.g. payment of land/property tax, insurance, repairs, and mortgage interest paid – not principal repayments.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. I own a motor vehicle, which I use to perform official duties, and I receive a traveling allowance. Is this taxable?
Where traveling allowance is paid in cash to an employee, in which the allowance represents a reimbursement of expenses incurred in the performance of duties, and the Commissioner is satisfied that it is reasonable, permission may be given for payments to be made without the deduction of tax.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. My employer provides me with a credit card, which is used for both private and business purposes. How should this be taxed?
Each time the card is used for private purposes – namely the purchasing of goods or services or providing money – the employee is to be treated as having received emoluments equal to the expense incurred by the person providing the card. The expense incurred by the employer must be reduced by any portion made good to him by the employee.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. Is an entertainment allowance taxable?
Yes. Where the Commissioner is satisfied that the expenses for entertainment were incurred wholly and exclusively in acquiring the income, the amount so determined will not be taxed.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. I am employed in the Financial Industry and receive a loan at a concessionary rate. Are there any tax implications?
Yes. Effective January 1, 1999, employees in specified Financial Institutions (see below) are liable to pay tax on the difference in interest payments between the concessionary rate and a prescribed rate of 14%, arising from any loan exceeding $1,500,000. The tax is deductible under the PAYE system.
Specified Financial Institutions: Section 5 (a)
Bank of Jamaica
Merchant Banks
Development Banks
Insurance Companies
Building Societies licensed under the Buildings Societies Act
Trust Companies, and
Any other institution licensed under the Banking Act or the Financial Institutions Act, as the case may be.
Only loans up to a maximum of $1,500,000, if used for the following purposed will be exempt:
purchasing house for owner occupancy
purchasing a motor vehicle, for private use
purchasing land
education
training
emergency needs (compassionate loan), and
furnishing of residence for owner occupation
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Definitions
Q. What does the word ‘threshold’ mean?
Although not defined in the Income Tax Act, the threshold refers normally to that part of an individual’s statutory income which bears no tax.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. What is ‘Statutory Income’?
Statutory Income is the aggregate amount of income of any person from all sources, remaining after allowing the appropriate deductions and exemptions given under the Income Tax Act. E.g. a 58-year-old pensioner receives the following gross income:
Salary $120,000
Net Rental $ 18,000
Interest Income (gross) $ 6,000
Pension $ 30,000
Total $174,000
The following deductions are made from salary:
NHT @ 2% $ 2,400
Education tax @ 2%(after NIS & Superannuation) $ 2,340
NIS $ 3,000
Approved Superannuation $ 6,000
Total income as above $174,000
Less Allowable Deductions:
NIS $ 4,350
Approved Superannuation $ 6,000
Pension Exemption $ 45,000
$ 55,350
Statutory Income $118,650
========
Income Tax is charged at the rate of 25% after deducting the threshold from statutory income.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. What does the term ‘emoluments’ mean?
The term includes salaries, wages, overtime pay, fees, bonuses, perquisites, accommodation, entertainment utilities and other benefits of employment in money or otherwise.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. Who are ‘Prescribed Persons’?
Prescribed persons include Banks, Building Societies, Co-operatives, and Institutions operating under The Financial Institutions Act.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Q. Should I notify TAAD when I close my business or change my organization structure?
Yes, you should notify TAAD if:
You close your business, or
Business registration is changed from a sole trader to a company or partnership, or
A director ceases to be so.
Source: “Facts on Income Tax”. Taxpayer Audit and Assessment Department (TAAD) and the Tax Administration Services Department (TASD)
Education Tax
Q. At what age does one begin to pay Education Tax?
18 years.
Source: “101 Frequently Asked Questions”. Jamaica Tax Administration booklet
Q. At what age do persons stop paying Education Tax?
65 years for both males and females.
Source: “101 Frequently Asked Questions”. Jamaica Tax Administration booklet
Q. Is there any limit to the amount one should pay for Education tax?
There is no limit. Deduct NIS from gross emoluments and calculate 2% for employees and 3% for employers. Self-employed persons pay 2%.
Source: “101 Frequently Asked Questions”. Jamaica Tax Administration booklet
GCT
Q. Since construction activity is exempt, how is the input tax incurred treated?
This should be absorbed into the cost of the operations.
Source: “101 Frequently Asked Questions”. Jamaica Tax Administration booklet
Q. I was told that only 50% of the input tax on motor vehicle expenses can be recovered from TAAD. How is the disallowed amount treated?
This is claimed in the profit and loss account of the business as an expense.
Note: if any private element is included, this must be deducted.
Source: “101 Frequently Asked Questions”. Jamaica Tax Administration booklet
Q. I noticed that there are two rated for GCT on my telephone bill. Why?
GCT on the rental of the instrument is 16.5%, while the calls attract 20%.
Source: “101 Frequently Asked Questions”. Jamaica Tax Administration booklet
| Next |
