Tax Guide for US Expats Living and Working in Jamaica
Who Is Liable For Income Taxes in Jamaica
Individuals who are resident and domiciled in Jamaica are taxed on worldwide income. Individuals who are resident but not domiciled in Jamaica are generally taxed on their Jamaican-source income and on foreign-source income that is remitted to Jamaica. However, if the individual is present in Jamaica in a tax year for a total of three months or more, any foreign employment income that relates to work done in Jamaica or elsewhere in relation to Jamaica, is subject to tax in Jamaica regardless of where it is received. Nonresidents are taxed only on Jamaican-source income and on remittances of foreign income to Jamaica.
In general, individuals are considered resident if they stay in Jamaica for six months or longer. Other factors that may be considered include whether they (or their spouses) have a place of abode available for their use in Jamaica, and if they habitually visit Jamaica for substantial periods. The tax authorities are likely to regard periods totaling three months as substantial and visits as habitual if the individual is present in Jamaica for approximately three months annually for four consecutive years.
For an individual who is in Jamaica for a temporary purpose only and not with an intent to establish residence, and who has not actually resided in Jamaica in any year of assessment for a period of six months (or periods aggregating to six months), income arising outside Jamaica is not subject to income tax in Jamaica.
All resident employees with annual income exceeding J$441,168 are subject to tax. Nonresidents are generally not eligible for the J$441,168 exemption available to Jamaican residents. To be considered a resident for tax purposes in the 2011 tax year, and benefit from the income tax threshold of $441,168, a person is required to be in Jamaica for 183 days or more in the 2011 tax year. All self-employed individuals are subject to tax.
Nonresidents are subject to tax on all Jamaican-source employment income (unless specifically exempted under applicable double tax treaty provisions). A nonresident employed by a resident employer is treated as resident from the first day of employment.
A nonresident employed in Jamaica by a foreign employer for less than three months is taxed on remittances to Jamaica only. However, if the employee performs the work over a period of three months or longer in the year of assessment, he or she is taxable in Jamaica, regardless of whether the payment is received in Jamaica.
Income subject to tax. The taxation of various types of income is described below. For a table outlining the taxability of income items.
Employment income. All compensation arising in Jamaica or accruing to any person from an office or employment in Jamaica is subject to tax. This includes salaries, wages and bonuses. Benefits in kind and allowances are taxable, but the Tax Commissioner may allow a portion to be exempt.
Accommodation supplied by an employer to an employee is a benefit that is fully taxable to the employee.
Self-employment and business income. Residents are subject to tax on profits from self-employment and business activities as ordinary income at the rates.
Investment income. Interest paid by specified entities (called “prescribed persons”) to individuals is subject to withholding tax at a rate of 25%. Prescribed persons include financial institutions, licensed securities dealers, life insurance companies, building societies, issuers of commercial paper, unit trust management companies, certain industrial and provident societies, the Ministry of Finance and certain other entities specified under the Income Tax Act.
No income tax is payable on ordinary dividends paid by Jamaican resident companies to Jamaican resident shareholders. Preference dividends paid to Jamaican residents that qualify for income tax deduction are subject to tax in the hands of the recipients, while preference dividends that do not qualify for income tax deduction may be treated as ordinary dividends and taxed at 0%. Ordinary or preference dividends paid by Jamaican resident companies to nonresident individuals are subject to tax at a rate of 25% or at a lower rate prescribed by an applicable double tax treaty.
Directors’ fees. Directors’ fees are treated as taxable income for the year of assessment to which they relate and are subject to tax with other income at the rates described in Rates. Employers must treat directors’ fees paid as emoluments that are subject to the deduction of income tax. If the directors are also employed by the same company, they are subject to other statutory deductions.
Concessionary loans. Directors and employees who, by reason of their employment in a specified financial institution, receive concessionary loans (loans at a rate of interest lower than the prescribed rate), are taxable on the cash equivalent of the benefit of the loan, that is, the difference between the interest at the prescribed rate and the interest actually paid at the concessionary rate.
Exempt income. If received from a superannuation or pension scheme approved by the Commissioner of the Taxpayer Audit and Assessment Department, lump-sum payments up to the prescribed limit specified by the Income Tax Act may be exempt from income tax. Lump sums paid from the government’s Consolidated Fund are not subject to income tax.
Individuals receiving a pension from an approved superannuation fund or from a pension or retirement scheme approved by the Tax Commissioner are exempt from tax on up to J$80,000 of the income. The exemption is restricted to the lower of the pension income or J$80,000 if the pensioner is under 55 years of age. Individuals 65 years of age and older enjoy an income exemption of J$80,000.
Individuals classified as handicapped under the Income Tax Act are exempt from tax on all salary and pension income.
The above exemptions are available to both residents and non-residents.
Resident self-employed individuals are entitled to an income tax exemption for the first J$441,168 of their income. This exemption does not apply to nonresidents.
Capital gains. Jamaica does not impose tax on capital gains.
Taxation of employer-provided stock options. In practice, employer-provided stock options are taxable only at grant on the difference between the actual grant price and the market price at the grant date.
Deductions
Deductible expenses. Charitable donations are deductible, up to a maximum of 5% of taxable income.
Personal deductions and allowances. Pension contributions of up to 10% of an employee’s annual remuneration to approved pension schemes and contributions to the national insurance scheme are deductible for the employee. However, if an employer contributes less that 10% of the employee’s annual remuneration, the employee may contribute the difference between the employer’s actual contribution and the maximum contribution payable by the employer (that is, 10%). The difference contributed by the employee is also deductible for income tax purposes.
Business deductions. All expenses incurred wholly and exclusively in producing self-employment or business income are deductible.
Relief for losses. Losses may be carried forward indefinitely to offset profits or gains arising from a trade, business or profession carried on in Jamaica or from the ownership or occupation of land in Jamaica. No carryback of losses is allowed.
Approved agricultural activities may be granted relief from income tax for five to ten years; losses from these activities may be used to offset income from all sources. Losses from unapproved agricultural activities may be offset only against profits from unapproved agricultural activities. These losses may be carried forward indefinitely.
B. Other taxes
Transfer tax. Although Jamaica has no estate tax, transfer tax is payable at the following rates on the transfer of land and shares in a Jamaican company.
Wills are probated in accordance with the laws of the country of domicile of the deceased, and real property is transferred according to the laws of the country where the property is located.
Stamp duty. Effective from 16 May 2011, if a mortgage is refinanced for an equal or lesser amount, stamp duty is payable at a rate of J$100. If the refinancing is for a greater amount than the original amount, a stamp duty rate of 1.25 cents per J$200 or part thereof applies to the additional amount secured (the difference between the refinanced amount and the original amount secured).
C. Social security
Contributions. The applicable social security contributions and other payroll taxes are described in the following paragraphs.
National insurance rates are 5% for employed and self-employed workers, other than domestics, on annual earnings of up to J$1 million. For employees, the 5% is paid one-half by the employee and one-half by the employer. For domestic workers, the employer and the employee each pay J$10 a week. These contributions are mandatory.
National housing trust contributions are made at a rate of 5% of salary, borne 2% by the employee and 3% by the employer. Self-employed persons contribute at a rate of 3% of gross taxable income. Contributions by employees and self-employed persons, together with a bonus, are refundable to the contributor on an annual basis after seven years of contribution or in full after retirement at 65 years of age.
An education tax is payable at a rate of 5% of salary, borne 2% by the employee and 3% by the employer. Self-employed persons are subject to tax at a rate of 2% of net taxable income (after deduction of pension and national insurance contributions).
Totalization agreements. To prevent double social security taxes and to assure benefit coverage, Jamaica has entered into totalization agreements with Antigua and Barbuda, Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Guyana, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago and the United Kingdom.
For purposes of the U.K. totalization agreement, the United Kingdom is defined to include Alderney, the Channel Islands of Guernsey, Herm, Jersey and Jethou, England, the Isle of Man, Northern Ireland, Scotland and Wales.
To learn more about the history, culture, economy and other information about Jamaica
We have been preparing US income tax returns for US Citizens and permanent residents living in Jamaica for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Jamaica and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Jamaica.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email