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Story Highlights

  • Ian Wood, an Advance Pricing Agreement (APA) expert affiliated to the Organisation for Economic Co-operation and Development (OECD), met with Finance Minister, Hon. Audley Shaw and his technical teams from Tax Administration of Jamaica and the Taxation Policy Division (MoFPS) earlier this week at the Ministry.
  • Several rounds of meetings have been arranged this week with the APA expert, the Ministry's Taxation technical team and those from TAJ with key stakeholders such as the Private Sector Organisation of Jamaica, Institute of Chartered Accountants, Jamaica Hotel and Tourism Association.
  • Transfer Pricing Provision is one the Reform initiatives which is geared towards improving the macro economic framework of Jamaica.

Ian Wood, an Advance Pricing Agreement (APA) expert affiliated to the Organisation for Economic Co-operation and Development (OECD), met with Finance Minister, Hon. Audley Shaw and his technical teams from Tax Administration of Jamaica and the Taxation Policy Division (MoFPS) earlier this week at the Ministry. The discussions centred around possible bi-lateral agreements with agencies of government, and the application of a co-operative approach to the implementation of Transfer Pricing Provision.

Minister Shaw advised the meeting that his intent was to ensure that the implementation of Transfer Pricing Rules was to be “aligned with international best practice and should build a comfort level with the business sector.” He added that the implementation should not be adversarial and should level the playing field. In this context, Minister Shaw said the development of mutually acceptable Advance Pricing agreements (APAs) should be encouraged.

Ian Wood explained that the Advance Pricing Agreement which was being discussed would create a level playing field, and adopts a co-operative approach to implementation. He continued to say that the benefits of an APA are:
 A non-confrontational approach to implementation;
 that the process is centred around business processes, and how organisations conduct their business,
 that it reduces the incidence of double taxation and;
 it is consensus-driven based on factual data.

Several rounds of meetings have been arranged this week with the APA expert, the Ministry’s Taxation technical team and those from TAJ with key stakeholders such as the Private Sector Organisation of Jamaica, Institute of Chartered Accountants, Jamaica Hotel and Tourism Association.

The technical team will continue to engage the business leaders through stakeholder forums and individual discussions to ensure that the implementation of Transfer Pricing is seamless and consensual.

In 1970 the Income Tax Act (Section 17), The Arm’s Length Principle (ALP) was introduced, and it is the foundation of internationally accepted transfer pricing rules. In 2011 Cabinet approved the introduction of Transfer Pricing Rules, and in 2015 the anti-avoidance provisions in Jamaica’s Income Tax Act were amended by Parliament to introduce transfer pricing rules applicable to transactions between connected persons. The Transfer Pricing Rules are based on the Organisation for Economic Co-operation and Development (OECD) standards.

The new rules allow for another method other than a transfer pricing method to be applied with permission from Tax Administration Jamaica. This is applicable when none of the transfer pricing methods can reasonably be applied to determine arm’s length pricing for the connected party transaction, and the other method yield results consistent with that which would be achieved by persons participating in a comparable independent transaction. As such it removes subjectivity, provides for a degree of clarity and creates certainty to taxpayers on the acceptable methods of determining the transfer price based on the Arm’s Length Principle.

The 2015 Amendments to the Income Tax Act would impact (but not limited to these):
 Multi-national companies with affiliates in Jamaica.
 Jamaican companies with affiliates outside Jamaica.
 Use of tax havens by Jamaican companies and;
 Transactions between Jamaican (domestic) companies that are connected.

Transfer Pricing Provision is one the Reform initiatives which is geared towards improving the macro economic framework of Jamaica. The Finance Minister however emphasised that the Legislation must not be implemented retroactively.