Factories Corporation of Jamaica (FCJ), the Government’s largest purveyor of manufacturing space, indicates that the company currently has 46,000 square feet of space available for rental at over 15 properties islandwide.

The agency indicated to the Jamaica Observer that, while currently none of its locations has special economic zone (SEZ) status, it has given support which has led to four of its clients securing such status.

“We will continue to do so when our clients make the request of us,” it stated on November 5, 2021 in a response to a request for information.

The SEZ regime includes a corporate income tax headline rate of 12.5 per cent. According to the SEZ website, with approval of additional tax credits, an even lower rate could be received of 7.5 per cent.

In the past decade, many of the FCJ’s lessees operated under the free zone regime, but not all of them opted to transition to SEZ.

Eric Deans, CEO and principal architect of the Jamaica Logistics Hub initiative, told the Business Observer, “All free zone companies were given four years to transition to SEZ, ‘the grandfathering period’.” He noted that those companies that chose not to transition at the end of the period are no longer eligible.

The FCJ itself states that there is a cost attached to SEZ status, and so “It was not considered viable to transition the former free zones into SEZs in a wholesale manner, as this would not benefit most of our existing clients, which are already existing businesses. SEZ status can only be granted to new entities.”

However, it was stated, the FCJ “stands ready” to assist new investors in the process of seeking designation under the regime which provides tax benefits.

The FCJ also clarified that a company owned by Fosrich Limited, Blue Emerald in Hayes, Clarendon, is advanced in its SEZ application

It said that the process is awaiting technical issues which have created the delays in finalising the SEZ application surrounding a 50-year lease agreement between Sugar Company of Jamaica Limited (SCJ) and Complant.

“SCJ and Complant are registered on the parent title from which FCJ is to obtain a splinter title for the lands that the corporation is in the process of purchasing from SCJ. Efforts are being made by SCJ and FCJ attorneys, through the Stamp Office and the NLA [National Land Agency], to have these matters resolved in the shortest possible time.”

Other SEZ benefits, aside from lower corporate tax, include relief from income tax on rental income — income tax is a charge imposed on entities based on their income or profits. Multipurpose developers or operators are largely exempt from the payment of the income tax on profits derived from rentals of property in the zone.

The regime also offers value-added tax (VAT) relief enacted on the supply of goods and services within Jamaica. As a benefit to the developer or occupant, goods and services entering for use in the Zone, including electricity and telephone services supplied to the zone, are subjected to General Consumption Tax (GCT) at a rate of zero per cent as opposed to 15 per cent .

Employment tax credit is an income tax credit which is granted to eligible employers. Employers who are involved in a trade, profession, or vocation may claim this tax credit against income tax payable based on specified payments (for example Education Tax, National Insurance Scheme (NIS), National Housing Trust (NHT), and Human, Employment and Resource Training (HEART) contributions) which have been filed and paid on time.

The regime also offers promotional tax credit (R&D and training) in an amount equal to the developer’s or occupant’s expenditure on R&D and training, up to a maximum which is equal to 10 per cent of the tax on the developer’s or occupant’s chargeable income.

The SEZ Capital Allowance benefit allows taxpayers to get tax relief on their tangible capital expenditure by permitting it to be deducted against their annual taxable income.

Customs duty relief is set against imported goods and is assessed based on the type of item and cost of the goods imported. The Developer or occupant is exempted from Customs duties on items imported into the zone.

Under SEZ also approved companies are also exempt from 50 per cent of stamp duty payable on instruments used for the purchase, lease or other acquisition of land for the use as a zone by a developer.

There is also an exemption of 100 per cent of stamp duty payable on instruments used for the sale or lease of land by the developer to occupants or zone users.

A developer is also exempted from transfer tax payable on the sale of land by the developer for the purposes of use in the development or operation of the zone.