Senate Approves Income Tax (Amendment) Act, 2022

The Senate, on Thursday (November 17), approved the Income Tax (Amendment) Act, 2022, which ensures conformity with international obligations.

Minister of Foreign Affairs and Foreign Trade, Senator the Hon. Kamina Johnson Smith, who piloted the legislation in the Upper House, said the Bill is a companion to the recently passed Special Economic Zone Amendment Act.

“Both pieces of legislation work together to ensure conformity with international standards of tax transparency as well as improving efficiency in the administration of the regime,” she informed.

Minister Johnson Smith said the policy objective, as driven by the Ministry of Industry, Investment and Commerce, has always been to increase the economy’s productive capacity, noting that the incentives provided within the special economic zones (SEZs) are designed to facilitate their contribution to nation-building.

“The incentives are found across multiple pieces of tax legislation, including the Income Tax Act. But it came to the Government’s attention that there were instances in which the policy was not clear or clearly articulated,” she pointed out.

Senator Johnson Smith said consequent on further international reviews, it was determined that amendments were needed for clarity, “and in order for the SEZs to be compliant with our international obligations”.

“Those amendments were recently undertaken and these amendments, today, now ensure that the Income Tax Act is coherently implemented together with that body of legislation,” she added.

Senator Johnson Smith said the Government is ensuring that it improves the administration of the regime by addressing the ambiguities that have been noted.

“One of the primary incentives provided for in the Income Tax Act is the Employment Tax Credit (ETC), which provides business owners the ability to claim credit against income tax payable for their contributions to their employees’ statutory deductions. But the set of legislation have provisions which prohibited entities in economic zones from claiming the benefit. That was addressed and now the amendment to the Income Tax Act will provide further clarity by widening the scope of the ETC to include businesses under the SEZA, so they work in a cycle ensuring that they support each other,” she explained.

Minister Johnson Smith pointed out that Clauses Two and Three allow for the insertion of the word ‘business’ with respect to the application of the employment tax credit, and the treatment of dividends in sections 32(a) and 38, respectively.

“This ensures that the entities that offer business process outsourcing can operate in the zones and receive benefits contemplated by the SEZA and the Income Tax Act, when they are taken together,” she informed.

Senator Johnson Smith further stated that Clause Four deletes the provision in the First Schedule, which references the repealed Free Zone and Free Zones Act.

“Therefore, both Tax Administration Jamaica and the Special Economic Zone Authority can continue to function cohesively, as intended by the policy,” she said.

Minister Johnson Smith said the Government continues to make strides in ensuring that Jamaica is the place to do business.

“Before COVID, we knew that we were well on our way [to] reaping results. We were voted best destination in the Caribbean for doing business, for example, and post-Covid, business and consumer confidence are both at their strongest,” she indicated.

“Part of this success is, of course, the Government’s strides to facilitate investment through a strong legal framework supported by various trade agreements and incentives, which are aligned with our international obligations,” Senator Johnson Smith added.