How the new minimum business tax affects you
ON April 1, 2014 the Provisional Collection of Tax (Minimum Business Tax) Order, 2014, took effect. In this article I will attempt to explain this new tax and its impact.
What is the minimum business tax?
The minimum business tax is the sum of $60,000 which is payable in respect of each year of assessment being the period of 12 months commencing on the 1st January in each year. The tax is payable in two equal instalments of $30,000 each: the first instalment is payable on or before June 15 of the year of assessment and the second on or before September 15 of the year of assessment. The first year of assessment is the year 2014 and the first instalment of the minimum business tax is therefore due on or before June 15, 2014.
Who is liable to pay?
The minimum business tax is payable by every "specified taxpayer" in respect of each year of assessment.
According to the Order a specified taxpayer is:
1. a company or other body corporate incorporated or registered in Jamaica under :
(a) The Companies Act (this includes overseas companies registered under the Companies Act);
(b) The Building Societies Act;
(c) The Friendly Societies Act; and
(d) The Industrial and Provident Societies Act but not one that has been registered as a charitable organisation under the Charities Act, 2013; and
2. an individual who operates a trade, profession, vocation, or business that has gross revenue of not less than $3 million in the year of assessment. (Gross revenue in the case of an individual means his/her statutory income after deducting an amount equal to the income tax threshold amount and income from emoluments.)
Crediting income tax liability
The minimum business tax paid by a specified taxpayer is to be credited towards the income tax payable by the specified taxpayer for the year of assessment only and cannot be used to offset tax liability in any other year. The tax is therefore to be treated as a discharge by the specified taxpayer of its liability to income tax for the year of assessment to the extent of the amount of the tax paid. The remainder of the specified taxpayer's liability to income tax remains and is not otherwise affected by this payment or discharge.
Where the Commissioner General determines that the minimum business tax paid by a specified taxpayer who is an individual, is greater than his/her income tax liability for the year of assessment for which the tax is paid, the taxpayer is entitled to a refund of the excess after filing his/her income tax return for the year of assessment. If the excess is not refunded it may be carried forward and credited against the income tax liability of the specified taxpayer (but not against minimum business tax) in
any subsequent year of assessment.
In the case of a specified taxpayer that is a company or other body corporate, the excess tax is not refundable and cannot be carried forward or credited against the minimum business tax or other income tax payable by the specified taxpayer in any subsequent year of assessment. This applies notwithstanding that for any reason the taxpayer's liability is nil.
Penalty for not paying
Failure to pay the whole to any part of the minimum business tax is liable to the prescribed penalty (1.5 per cent per month) for the month it is outstanding and each subsequent month or part thereof until the tax is paid in full. Minimum business tax will be treated outstanding if it is unpaid on the first day of the calendar month following the date for payment that is July 1 and October 1.
The imposition of the minimum business tax is not concerned with the company's status that is whether a company is dormant, inactive or operating. The tax is payable by reason of the fact of being a specified taxpayer and nothing more.
Up until the time of writing, the writer had not seen the form or return that is expected to accompany the payment of the minimum business tax. We expect that as July 1 approaches, one will be available.
Gina Phillipps-Black is a Partner at Myers, Fletcher & Gordon and is a member of the firm's Commercial Department. Gina may be contacted via email@example.com or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.