Government Revises GCT on Imported Services

Technical Specialist at Tax Administration Jamaica (TAJ), Donna Newman, says the Government has “revised and revamped” how General Consumption Tax (GCT) is applied to imported services.

Resident tax payers will now be required to pay GCT on any service that would normally be taxable if it was supplied locally.

Ms. Newman, who was addressing a recent JIS ‘Think Tank’, explained that registered tax payers are not charged GCT by their suppliers overseas. Instead, she said payments will be treated as tax inclusive and the required GCT paid over to the Government of Jamaica.

Additionally, individuals will no longer be able to claim input tax credit in relation to imported services if there is connectivity between the registered tax payer and the person making the supply outside of Jamaica.

An input tax is a GCT charged to a registered taxpayer on the supply of goods and services made to him, or on the importation of goods and services into Jamaica for the purpose of making a taxable supply.

“This revision was necessary because in the past individuals were not correctly accounting for the GCT on imported services, primarily because there was uncertainty how it should work,” Ms. Newman noted.

She explained that in an effort to increase compliance, the TAJ is conducting islandwide sensitization sessions on the new revenue measures to inform and educate   taxpayers.

The TAJ also advised that the first payment of $30,000 under the new Minimum Business Tax, which took effect April 1, is due on June 15. This requires registered business owners to pay a minimum business tax of $60,000 in two installments on June 15 and September 15.

The Technical Specialist told JIS News that some business owners may be eligible for a refund from paying this tax. “Individuals may be able to get a refund if their income tax liability is less than the minimum business tax they have paid,” she said.

She also noted that companies and individuals receive the minimum business tax paid as a tax credit against their income tax liability.

Meanwhile, asset tax rates have also been modified under the ongoing tax reform process. Companies are in two specified bodies, regulated and unregulated, which will determine how their asset tax is charged.

Regulated entities are organisations that are deposit taking institutions regulated by the Bank of Jamaica, and Insurance and Security dealers which are regulated by the Financial Services Commission (FSC).

These institutions will see an increase in their asset tax rate from 0.14 to 0.25 per cent, with the exception of Life Insurance companies, whose rate will increase to 1 per cent for the 2014 assessment year.

“After the 2014 year of assessment, their rate should be reduced to 0.25 per cent as with the other regulated bodies,” Ms. Newman added.

Unregulated bodies however, will continue to pay asset tax at varying rates depending on the value of their assets. This increase will range from a low of $50,000 per annum to a high of $100,000.

“Some persons would have seen a 100 per cent increase, while those at the lower bands have not been increased at all,” Ms. Newman explained.

Another measure under the Government’s tax reform process is an increase  in the personal income tax threshold from $507,312 to $557,232. This will take effect on the first day of January 2015.