It is often assumed that because a person lives in Jamaica, or is “resident” here, all of his income is automatically subject to the clutches of the tax man. This is not so. Residency is only part of the taxation equation. The other part is determined by an individual’s domicile. Indeed it can be seen that Jamaica is extremely tax friendly to the foreign domiciliary.

Jamaican residents, regardless of their domicile, cannot escape paying tax on their local income (i.e. income generated in Jamaica). However, Jamaican residents who are domiciled outside of Jamaica, are not taxable on their worldwide income unless it is remitted (i.e. brought in) to Jamaica. In other words, generally speaking, a foreign domiciliary will not be subject to tax in Jamaica on any foreign income if this is kept outside of Jamaica.

In law everyone must have a domicile. At birth, a person acquires a domicile of origin. This will be the domicile of one of his parents, usually his father. A child born to married parents during the lifetime of his father has his domicile of origin in the country in which his father was domiciled. A child born to unmarried parents or a child whose father is not alive at his birth has a domicile of origin in the country in which his mother was domiciled.

A domicile of origin can only be displaced by the acquisition of a domicile of choice. In order to abandon a domicile of origin and acquire a domicile of choice a person must, while being physically present (i.e. living) in another country, form an intention of permanent or indefinite residence. Without a combination of these two factors, the domicile of origin will remain. In simple terms a person cannot change their domicile until such time as they are living in a foreign country and decide then to make that country their permanent home.

While the first factor, that of physical residence, is easily satisfied, the second condition is very strict, and allows for some quite surprising results. In the United Kingdom, whose tax system similarly recognises the dual concept of residency and domicile, a taxpayer resided in England for 40 years but always hoped to return to his home in Nova Scotia (to which his wife objected) should he survive her or persuade her to change her mind. The Court held that was sufficient to prevent him from acquiring a UK Domicile, and that he retained his Canadian domicile of origin.

This dual concept of taxation has significant implications for individuals resident but not domiciled in Jamaica. Here are a number of ways such an individual could structure his affairs so as to minimise an exposure to local income tax:-

(1) Where a job involves both local and foreign responsibilities, a separate contract could be structured to cover the foreign element, which allows for payment outside of Jamaica;

(2) Keeping the income generated from foreign investments outside of Jamaica;

(3) Locating bank accounts outside of Jamaica. Interest generated will escape a liability to Jamaican income tax once not remitted here. Of course, unless the account is situated in a tax free jurisdiction, it may be subject to income tax in that country;

(4) Retiring to Jamaica! Jamaica can be a virtual tax haven for retired foreigners, who reside here but keep their investments abroad. Until recently, many wealthy foreigners retired to London to take advantage of this same (and very favourable) tax regime;

(5) Ex patriots and foreigners on short term contracts must manage their affairs so as to avoid the creation of an unintended tax liability; and

(6) Converting foreign earned income into capital before remitting same to Jamaica. This should not be considered without prior professional advice, as there are particular and somewhat complex rules on the subject. There is, for instance, the concept of a “constructive remittance”, where income earned abroad could be treated as having been constructively remitted to Jamaica if it was, for example, used to pay a foreign credit card bill which had been used to make purchases in Jamaica.

In summary, it is likely that anyone who is resident in Jamaica but domiciled elsewhere can do some form of sensible tax planning. While the majority of persons living here will have a Jamaican domicile, for those whose families have a clear “connection” to a foreign country, it may not be so automatic. Certainly, those either living in Jamaica for the short or medium term, or those who have lived abroad with some degree of permanence, may be able to successfully establish they do not have a Jamaican domicile.

Bruce Levy is a Partner at Myers, Fletcher & Gordon and is a member of the firm’s Commercial and Tax Departments. Bruce may be contacted via bruce.levy@mfg.com.jm or www.myersfletcher.com.