TAJ Develops Technical Advisory for Revised Income Tax Threshold and Pension Exemptions

Tax Administration Jamaica (TAJ) has developed a technical advisory as part of the process of implementing the increased income tax threshold and pension and age exemptions announced by the Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, during his 2024/25 Budget Debate presentation in March.

The first in a series of sensitisation sessions to discuss the advisory and the implementation of the tax changes with various stakeholders was held on Thursday, April 18. The webinar was held via the Zoom platform, with a second session slated for May 8.

The Advisory is available on the TAJ’s website, www.jamaicatax.gov.jm, under the link https://www.jamaicatax.gov.jm/web/guest/tax-bulletins for tax bulletins.

Senior TAJ Technical Specialist, Colleen Williams, said the sessions are designed to assist persons involved in the calculation of the new rates to become familiar with the computations, the individuals, and groups to which they apply, as well as the rationale and amounts of the entitlements for 2024, 2025 and thereafter.

She explained that only persons residing in Jamaica will benefit from the threshold, which aims to increase the non-tax portions of the salaries of the applicable persons.

The changes, which took effect on April 1, 2024, are an increase in the annual personal income tax threshold from $1,500,096 to $1,700,088, as well as an increase in the age (65 and over) and pension exemptions from $80,000 each to $250,040.

The TAJ representative pointed out that the new income tax threshold of $1,700,088 annually would compute to new rates for all three different pay cycles – weekly, fortnightly, and monthly.

The weekly rate moves from $28,848 to $32,694; fortnightly, from $57,696 to $65,388; and monthly, $125,008 to $141,674.

Ms. Williams explained, however, that the effective date of April 1 means that for this year, 2024, the new rates apply to only nine months of the annual tax obligations of eligible persons.

“So even though the Minister would have said that it is now $1,700,088, we will not be benefiting from the full amount of that this year because for the first three months of the year, the rate that prevailed was $1,500,096; and so, in order to arrive at the effective rate for 2024, we take three-twelfths of the $1,500,096 and we add that to nine-twelfths of the $1,700,088, and so the effective threshold for 2024 will be $1,650,090,” she said.

The online session saw questions being raised and answers provided for various stakeholders, including employers, human resource professionals and accountants.

Explaining the pension exemption provisions, Ms. Williams said Section 12 (1) z of the Income Tax Act, which provides for the pension exemption, stipulates that individuals deriving pension income from specified approved pension or retirement schemes operating in Jamaica are entitled to a pension exemption.

“A person must be in receipt of pension income in order to be entitled to pension exemption from taxes,” she informed.

The new tax exemption for pensioners moves from $80,000 per year to $250,040, effective April 1, 2024.

Ms. Williams noted that, considering the applicable nine months for 2024, the effective pension exemption for 2024 is $207,530.

Persons, 55 to 64 years, will be exempted from paying taxes on pension income of $207,530 for 2024, while the threshold for those beneficiaries for 2025 and onwards is $250,040.

Pensioners under 65 years will also enjoy a total tax-free entitlement of $1,857,620 for 2024 when their pension exemption of $207,530 is added to their income tax threshold of $1,650,090. For 2025, onwards, their total tax-free entitlement is $1,950,128.

There are also provisions for tax exemptions based on age. The age exemption applies to all persons who are 65 years or older. The exemption for 2024 is $207,530, and $250,040 for 2025, onwards.

Pensioners, 65 and over, will benefit from the pension exemption, age exemption and income tax threshold revisions.

Therefore, the total tax-free entitlement for pensioners 65 years and over is $2,065,150 for 2024 and $2,200,168 for 2025 and beyond.

There are also special provisions for pensioners who are certified as being permanently incapacitated.

“Pensioners who are certified to be permanently incapacitated will be allowed the pension exemption of $207,530 for 2024 and the full amount of $250,040 for 2025…. and may use their pension exemption against all sources of income, irrespective of their age,” she stated.

Ms. Williams emphasised: “This is always subject to the individual having the level of income to utilise that tax-free entitlement.”

Persons may contact the Tax Administration’s Customer Care Centre at 888-TAX-HELP (888-829-4357) for further information.