MINISTER of Finance Dr Nigel Clarke has shot down an announcement from his colleague Investment Minister Aubyn Hill that investors would get an extended tax holiday if they invested in the long-talked-about Caymanas Special Economic Zone (SEZ).

In mid-June Senator Hill, who also has the industry and commerce portfolios, had said that investors in Caymanas would receive special benefits, to include no income tax charges for 50 years. “In contrast, by lease, you’ll get this wonderful piece of land,” he added.

But sources at the Ministry of Finance have indicated that this offer is incorrect and out of line with the Special Economic Zone Act.

On Thursday, Clarke, in response to Jamaica Observer queries on the matter, said, “there are no new fiscal benefits contemplated for the special economic zones at this time.”

He added:”The fiscal benefits that already exist, and that are set out in the Special Economic Zones Act, are the ones that will apply to any new SEZ.”

The Caribbean Business Report learnt that resulting from the widespread publication of the “Caymanas offer”, existing SEZ operators, numbering dozens, have been making enquiries as to whether or not they have been missing out on these special benefits.

The SEZ, a project planned and developed in conjunction with the World Bank and local planning authorities, is based on a proposal for the best uses (industrial, ICT, transshipment, commercial, worker housing, and more) on a proposed 1,200-acre (485.62 hectare) site.

The project targets private developers and operates under the rubric of Jamaica’s SEZ and PPP policies. The plan for Caymanas draws on best practices linked to transshipment hubs globally.

Hills offer of tax-free benefits for five decades has attracted widespread international attention.

In an article entitled ‘Long- term tax benefits for investors in Caymanas SEZ’, the United States-based Washington Informer on June 22, quoting the Jamaica Information Service (JIS), stated, “Potential investors/developers who decide to operate within the proposed Caymanas Special Economic Zone (SEZ) in St Catherine, Jamaica, will enjoy tax-free benefits for an extended period of up to 50 years.”

Hill spoke on June 16 to global investors from the World Free Zones Organization’s Annual International Conference and Exhibition (AICE), 2022, held in Montego Bay from June 13 to 17.

As part of the conference, investors participated in the Port Authority of Jamaica (PAJ) Investor Tour of SEZs, ports and logistics facilities, which began at the proposed site of the Caymanas SEZ. Currently, more than 650 acres have been proposed for industrial and commercial spaces related to logistics requirements.

The Washington Informer, quoting JIS again, added, “Hill further noted that 50 years without any taxes on dividends will be beneficial to the developer/investor who can arrange to have as many business operators rent their property, as they will have a long-term lease that will be renewable.”

No new tax policy for SEZ

However, on Thursday, June 23, Minister Clarke, while saying there is no new policy, pointed to the existing SEZ Act which lists the benefits available to investors.

The Act offers to investors a corporate income tax headline rate of 12.5 per cent (possible effective rate of 7.5 per cent with the approval of additional tax credits). Income tax can therefore be as low as 7.5 per cent, but not as low as zero.

The income tax can be reduced to 7.5 per cent with the addition of an employment tax credit which is an income tax credit granted to eligible employers (Education Tax, National Insurance Scheme, National Housing Trust, and Human, Employment and Resource Training contributions) which have been filed and paid on time.

Under the Act, investors are also offered relief from income tax on rental income. The multi-purpose developer or an occupant is exempt from the payment of the income tax on profits derived from rentals of property in the zone, except for rentals where the landlord (whether the developer or an occupant) and tenant are connected persons within the meaning of the Income Tax Act.

Investors are also offered General Consumption Tax (GCT) relief. GCT is a value-added tax (VAT) 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 no GCT.

A capital allowance is available for taxpayers to get tax relief on their tangible capital expenditure by permitting it to be deducted against their annual taxable income.

There is also customs duty relief which is offered to investors. The duty is payable on imported goods and is assessed based on the type of item and cost of the goods imported. It is available on goods and items imported into the zone.

For investors in SEZ, there is also an exemption of 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, additionally, 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 in connection to the development or operation of the zone.

Investors are additionally offered relief from transfer tax which involves the passing of title to property from one person or entity to another. A developer is exempted from transfer tax payable under the Act on the sale of land by the developer for the purposes of use in the development or operation of the zone.

Finally, an investor is also offered promotional tax credit (R&D and training) – a promotional tax credit 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.

At last report, the Government of Jamaica earned $381 million from SEZ entities in June 2020. As at March 2020, there were a total of 134 approved free zone entities, representing 98 per cent, which had transitioned to the new SEZ regime. Another 52 new SEZ developers, who entered into licensing agreements with the Jamaica Special Economic Zone Authority (JSEZA), brought the complement of SEZ entities to 183 up to that time.