WHY do we have to pay transfer tax on the assets we inherit such as land, houses, shares or motor vehicles (depending on circumstances)? Because of the Transfer Tax Act which mandates that estate taxes are to be paid on the market value, as of the date of death, of asset(s) that were owned by a deceased individual. Transfer tax is currently calculated at 1.5 per cent of this market value.

Also, once the total value of the deceased’s estate is calculated the tax should be paid as quickly as possible, otherwise, the tax payable will attract interest at the rate of 6 per cent per annum.

EXEMPTIONS

The Jamaican Government has increased the exemption threshold to $10 million. This means that if the deceased’s taxable assets at the date of death are valued at this amount or less, their estate will be exempted from this tax. However, this is not an automatic exemption in that you, as the heir or beneficiary, will still be required to submit an application to Tax Administration Jamaica and provide all the necessary documents for a determination to be made.

SPOUSES

Marriage

Let’s assume that a deceased individual held a house with their surviving spouse as the joint tenant and that it is their matrimonial home. The surviving spouse can submit the necessary application to the tax authorities and, after they have examined it, it can be excluded from the assets for which the spouse must pay the transfer tax. Even if the deceased held this property in his/her name alone but it is the matrimonial home and can be proven to be so, the surviving spouse should obtain an exemption.

Common-law spouse

The Property (Rights of Spouses) Act defines ‘spouse’ as including a single man and a single woman who have been cohabiting together for at least five years as if they were, in law, husband and wife. The term ‘cohabit’ is defined as ‘to live together in a conjugal relationship outside of marriage’. Therefore, a common-law spouse should be able to obtain the same exemption as a husband/wife for their place of residence if it can be proven and is accepted as the principal place of residence of both the deceased and the surviving spouse.

It is important to note that only one property can be declared as the principal place of residence or the matrimonial home.

MOTOR VEHICLE

A personal motor vehicle held by a deceased individual can be transferred to the surviving spouse if the deceased was its sole owner.

ALLOWANCES

This legislation also offers some allowances that permit you to reduce the amount of death taxes you will have to pay if you can provide proof of your expenses such as funeral expenses, medical expenses and mortgage debts. But even if you have the necessary proof, the tax authorities may not accept all of the documents you provide. The assessor will determine which of these categories is applicable to receive the allowance.

JOINT TENANTS

Where property is held jointly and it is not the principal place of residence or the matrimonial home, then the surviving joint tenant or common-law spouse will be required to pay transfer tax of 1.5 per cent on the property’s value at the date of death of the deceased holder.

SHARES

In recent times we see the Jamaica Stock Exchange boasting about how well our local stock market is doing and reported also an increase in listed companies; which means that stock purchasing is another preferred way to invest. Therefore, it is important to note that where a deceased person held shares in any listed company, transfer tax will be payable on the total value of the shares held in each company as at the date of death.

FAILURE TO PAY

The stamp commissioner will assess the deceased’s estate using the documents you have submitted. This assessment is based on the market value as at date of death. Then, you must settle the said amount on the due date. If you are not in a position to pay the assessed tax then this amount will attract a penalty of 6 per cent interest per annum. Moreover, because of this failure to pay you will be unable to transfer the assets to the intended beneficiaries.

RECOMMENDATION

Estate law can be complicated so I recommend that you seek the services of an experienced, reputable estate attorney who can guide you and settle all matters related to the deceased’s estate successfully and without undue delay.

Venice Williams is a partner in the firm Lewis, Smith, Williams & Company. Email her at: vwilliams@lswlegal.com