Disaster Relief Honorarium to Employees to Be Tax Exempt

Cabinet has approved amendments to the Income Tax Act to facilitate a regime that allows for a non-taxable treatment of disaster relief honorarium made by employers to employees during periods in which a declaration of disaster has been issued.

Cabinet also approved the issuing of drafting instructions to the Chief Parliamentary Counsel to give effect to the proposed regime.

Minister of Finance and the Public Service, Hon. Fayval Williams, made the disclosure during a Statement to the House of Representatives, on Tuesday (December 9).

Hurricane Melissa made landfall on October 28 as a Category Five hurricane, resulting in catastrophic impact across several parishes. The event caused a significant loss of life, extensive population displacement and widespread damage to critical infrastructure.

Preliminary damage assessments have indicated US$8.8 billion of losses across various sectors, including housing, public infrastructure, agriculture and other key industries.

Mrs. Williams said the current legal framework governing the taxation of employment income does not provide a structured mechanism through which temporary disaster relief payments from employers to employees are exempt from income tax.

“The Income Tax Act at Section 2.1 defines emoluments in broad terms to include in ‘Paragraph A’ of the definition, salaries, fees, wages and any other benefits arising from employment, all of which are subject to income tax,” she stated.

She pointed out that a review of the Act indicates that apart from the Minister’s discretionary remission authority under Section 86 which applies only where it is considered just and equitable, there is no statutory mechanism through which disaster relief payments may be accorded non-taxable status on a consistent or system-wide basis following a declared disaster.

Mrs. Williams said the Ministry has implemented and operationalised an employee support and relief programme to support one-off or a limited series of disaster relief payments.

She informed that the programme permits employers to provide an honorarium either as a single payment or as multiple payments from November 1, 2025, to March 2026, up to an aggregate maximum of $200,000, without incurring statutory liability for either the employee or the employer.

“However, given Jamaica’s recurring exposure to climate-related disasters, the current measure is insufficient as a long-term solution due to its temporary nature. In the absence of an explicit statutory exemption, such payment risk being classified as taxable emoluments in future periods resulting in legal ambiguity, administrative inconsistency and inequitable treatment across employers and sectors,” Mrs. Williams said.

“As a result, a legislative amendment is required to provide appropriate statutory provisions for the treatment of these payments. Existing fiscal tools such as discretionary waivers, write-offs and ministerial remission are inadequate for the high-volume, time-sensitive nature of disaster-related income support. These mechanisms cannot be deployed at the scale or speed required during a declared disaster,” she added.

The Minister said under the proposed regime, disaster relief payments will be recognised as non-taxable only where they’re provided strictly for personal recovery, welfare or household needs and are not connected in any form to employment services, performance, compensation arrangements or ongoing remuneration.

“This ensures that the exemption is narrowly targeted and limited to situations where financial assistance is required to safeguard the welfare of employees facing an abrupt loss of income, housing or essential goods,” Mrs. William said.

She said the exemption will apply solely to cash payments, thereby avoiding interpretational ambiguity associated with in-kind benefits, allowances or fringe benefits that may otherwise fall within the statutory definition of emoluments.

To safeguard fiscal integrity and prevent potential abuse, the proposal includes a prescribed cap to be determined by the Minister.

Mrs. Williams explained that the prescribed cap is intended to strike a balance between providing meaningful support to affected workers and maintaining the principled structure of the income tax system.

The amount is also to minimise revenue risk and ensure that the exemption remains appropriately limited in nature, duration and fiscal impact.

Additionally, the application of the exemption will be limited to the period during which disaster declaration remains in force.

“The proposed legislative amendment would further require mandatory reporting and record keeping by employers pursuant to Regulation 14 (6) of the Income Tax Employment Regulation in the second schedule of the Income Tax Act,” the Minister said.

“Employers requiring relief payments must report such payments within monthly payroll submission to Tax Administration Jamaica (TAJ). This will enable TAJ to track utilisation of the exemption, support audit readiness and ensure alignment with the statutory purpose of the regime,” she said.

Employers will also be required to maintain contemporaneous documentation evidencing the purpose, amount, timing and justification for each payment.

Mrs. Williams said such records will facilitate appropriate post-compliance reviews and will help safeguard against misclassification of taxable remuneration as relief payments.

“In addition to the proposed amendment of Regulation 14 (6) of the Income Tax Employment Regulation in the second schedule of the Income Tax Act, it is proposed that Section 5 (1) (c) (I) and Section 13 of the Income Tax Act be amended to facilitate the proposal. The creation of a statutory mechanism reduces reliance on discretionary waivers under Section 86, thereby lowering the fiscal unpredictability associated with ad hoc remission,” Mrs. Williams said.

“This could improve medium-term fiscal planning by standardising how relief-related tax concessions are applied. The provision of these relief support payments is expected to generate positive secondary economic and fiscal effects by increasing disposable income and short-term purchasing power of affected individuals,” she added.

She further stated that the measure will enable households to meet immediate consumption needs.

She added that the increase in consumption is anticipated to stimulate demand within the formal economy and consequently support additional tax revenue through General Consumption Tax (GCT) and other related fiscal flows.

“Accordingly, while the honorarium itself will be non-taxable, the associated increase in economic activity is expected to contribute to overall revenue collection during the period of relief,” the Minister said.