TAX MEASURES that you MUST know before starting your Small Business in Jamaica

By: Kmar Henry
        CEO │ BIZcare Consultation & Accounting Firm

Date: July 25, 2017

Let's remove the fear for a while and let's think about getting the 'know how' we need to ensure that we won't be nervous if that tax compliance officer happens to pull up at our businesses. It is a fact that our Government has NOW implemented rather harsh penalties due to the high amount of tax payers and business owners who have not been complying with the necessary tax measures. Hence, filing late will now attract a late fee of $5000.00 per month. So let's do a rough estimate in our heads; 'let's say that we are one year late right, that would actually amount to $5000.00 x 12 months = $60,000.00?' Yes! You are very much correct, so let us look at the tax measures that we must comply with before we even think about starting a business.

1. SO4/ITO2/ITO3 Filing: Each is dependent on the type of business that you choose to start, so let us look at each separately:

           a. SO4: This required or used by persons who start a sole trader or choose to operate as a 

                        Trade As (T/A) which is accompanied by a Business Name. It is important to note that

                        with this business type, as a taxpayer, you still benefit from the Income Tax Threshold

                        which is now at $1,375,140.00 (2017) and will, however, increase to $1,500,000.00 as at

                        April 1, 2018.

           b. ITO2: This is used by persons who choose to start a Limited Liability Company. However,

                          with this type of a company, you are not entitled to receive the Tax Threshold 

                          benefit. Thus, shareholders are required to file their annual taxes individually also.

           c. ITO3: One of the most beneficial of sought if you choose to travel along the Partnership side

                          of doing or starting your business. This is due to the fact that both the aspect of profit

                          being shared and the Tax Threshold are considered. Hence, only profits are declared 

                          and then taxes are filed individually for each partner based how profit is shared.

It is also important to note that all filing methods requires also the filing of an estimate of the preceding year based on what was filed for the year before.  

2. GCT Filing: Perhaps one of the most misunderstood taxes among the Small Business community. Let me first establish that only persons or small businesses earning revenues of $3,000,000.00 or more are required to file or turn over the 'GCT portion back to the government.' Thus, if you are below you are NOT required to file in this respect. However, for those who are over this threshold you are required to file a 4A form MONTHLY; of which you are required to turn over the portion left when you subtract your sales from your purchases. Remember the GCT portion is calculated after you have attached your mark up on your 'UNIT COST.' So you are only turning over that amount and not your 'PROFIT.' Furthermore, it is important to remember that you will certainly end up with a credit amount in some months based on the purchasing nature of your business.

3. SO1 & SO2 Filing: In the real world, most businesses are avoiding this tax measure by going the contract route within the aspect of employment. Thus, employees are obligated to pay their own taxes if they need to for the period employed. And although this is not legal, employers are able to get away with this because of the desperate need for jobs. However, if you are taking into consideration the welfare of your employees, you are required file over their taxes monthly via the use of an SO1 Form based on their wages which should be over the minimum wage of $6,200.00 weekly or $24,800.00 monthly. You are then required to file over the total sum based on their salary throughout the year via the usage of an SO2 Form. You can visit the JamaicaTax.com website for more information on the rate of each tax portion based on employee and employer amounts. [Click Link to see Payroll RATES]

4. Minimum Business Tax: Implemented by our Government in the year 2015, this tax measure implicates that all businesses making a revenue of five (5) million or more are required to pay an amount of sixty thousand dollars ($60,000.00) via two halves ($30,000.00 each) yearly. The benefit of this tax is however only applicable to small businesses who earn over the threshold and are hence required to pay Income Tax. Thus, they are retrieved (credited) from the burden or a portion, only if the figure of $60,000.00 is paid throughout the year. So yes, your answer is as good as mine's; if you're making below the tax threshold this tax measure will only be another burden to pay.

5. Asset Tax: Although this is not required for a small business owner unless you are registered as a Company. This measure is taxed at the amount of Fixed Asset that you have or used in your operations and done via the use of an Asset Tax (AT101) Form. These figures are shown on the Jamaicatax.gov.jm website.

It is important to note that there are other fees which include your trade license, business registration and also property tax if you had required or are using your own building that you must pay. However, it is important to know and understand the five (5) named tax measures as these will prove pivotal towards the long-term survival and running of your Small Business. It is extremely important for us as Small Business owners to stay informed and knowledgeable of changes when they are implemented by our government. Thus, a good relationship with your compliance officer or tax accountant is essential.

For more information on these taxes and more contact us at BIZcare at 1 (876) 545-6928 or email us at BIZcareConsultationAcct@Gmail.com.

Edited by: Anthonio James
                     L.L.B. & BSc in Political Science

BIZcare Consultation & Accounting Firm is a consulting agency that operates within the small parish of Clarendon in the beautiful land of Jamaica. We are geared towards educating the minds of upcoming entrepreneurs of the important aspects that must be considered before starting their businesses. Hence why we operate under the slogan 'Your Business is OUR Priority' and tagline 'Helping Small Businesses & Individuals to better Organise their Business Functions.'


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