Withholding Tax on Specified Services to be implemented June 1

Tax Administration Jamaica (TAJ) is advising that after careful consideration, withholding tax on specified services will now be implemented on June 1, 2015. The new legislation will be introduced on a phased basis.  At this time only Government Ministries, Departments and Agencies, as well as financial institutions regulated by the FSC and BOJ, tourism operators, utility and cable companies, grossing over $500 million will be required to withhold 3% from payments made on specified services on invoice value of $50,000 or more. 

It should be noted that notwithstanding the withholding of the 3% income tax, persons from whom the tax is withheld are still obligated to file annual and estimated income tax returns and meet their quarterly obligations. They will however be able to claim as an income tax credit, amounts certified as being withheld against their quarterly and final obligations. Any excess credit is refundable on the final return.

The withholding tax on specified services is aimed at capturing persons liable to income tax but who are under reporting or not registered. It is expected that this tax measure will assist in the broadening of the tax base, increased reporting compliance and improved revenue collection.

The concept of withholding tax is not new to Jamaica. This mechanism is being used in other areas, such as in relation to employment PAYE, payment to non-residents, Contractor’s Levy and GCT on government purchases.

Over the years withholding tax has proven to be an efficient mode of tax collection and complements the administration of a self-assessment system. It is also in keeping with international trends.

Guidance notes and additional documents are available on the TAJ website at www.jamaicatax.gov.jm. Business persons needing guidance to implement the new requirement are advised to contact their TAJ Client Relationship Manager or the Technical Specialist Unit.