On April 1, 2014 the Provisional Collection of Tax (Minimum Business Tax) Order, 2014 took effect. This order empowered the commissioner general of Tax Administration Jamaica to collect a Minimum Business Tax (MBT) of $60,000 from “specified taxpayers”, payable in two equal instalments on or before June 15 and September 15 of each year.

According to the minister of finance, the policy rationale underlying the introduction of the MBT is to ensure that all businesses contribute to the government’s revenue to ensure a certain degree of equity in the application of tax collections. As such, when initially introduced the MBT was payable by virtually all business entities, irrespective of its circumstances.

On June 11, 2015 the Governor General gave his assent to the enactment of the Minimum Business Tax Act (the Act) which is deemed to have come into operation on March 31, 2014. The Act serves to confirm and validate, as lawful, the provisional imposition and collection of the MBT since June 2014. However, it also introduces categories of exemptions from payment of the MBT.

Specified taxpayers

Under the Act the MBT is payable by “specified taxpayers”. This term has been defined to include a company or other body corporate incorporated under the Companies Act (this includes overseas companies registered under the Companies Act), Building Societies Act, Co-Operative Societies Act, Friendly Societies Act and the Industrial and Provident Societies Act. Individuals carrying on a trade, profession, vocation or business are also captured within the definition of “specified taxpayer” if their gross revenue is at least $5 million.

Notably, the following entities are excluded from the definition of “specified taxpayers” and, as such, are not liable to pay the MBT:

1) a company that has been incorporated for not more than 24 months;

2) a charitable organisation registered under the Charities Act;

3) an international organisation that is the subject of a declaration under section 6 of the Diplomatic Immunities and Privileges Act;

4) A foreign organisation that is the subject of a declaration under section 3 of the Technical Assistance (Immunities and Privileges) Act; and

5) Individuals carrying on a trade, profession, vocation or business whose gross revenue is less than $5 million.

All other entities, including loss-making and dormant companies, will continue to be liable to pay the MBT.

It is also interesting to note, that payments made prior to June 11, 2015 by businesses that are now exempt, cannot be recovered from Tax Administration Jamaica (TAJ).

Penalty for non-payment

There has been no amendment to the penalty applicable for non-payment or late payment of the MBT. The MBT will be treated as outstanding if it is not paid by the first day of the calendar month following each due date (that is, July 1 and October 1 respectively). Failure to pay by these dates will result in the application of a penalty of one and a half per cent for the month in which it becomes outstanding and for each subsequent month until it is paid in full.

In 2014 when the MBT was initially introduced the TAJ reported that there was a high level of non-compliance among the 62,000 companies that it had on file. However, only time will tell whether the amendments to the law will result in increased compliance.

Kerry-Ann Heavens is an Associate at Myers, Fletcher & Gordon and is a member of the firm’s Commercial Department. Kerry-Ann may be contacted via Kerry-Ann.heavens@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.