Prime Minister Andrew Holness has signalled that the Government is considering a plan to reduce the withholding tax on dividends paid to Jamaican residents, as part of efforts to attract assets back to the island. The current withholding tax rate stands at 15 per cent for ordinary dividends paid by Jamaican tax-resident companies to Jamaican tax-resident shareholders.

“I can’t say too much at this time, but we are exploring a reduction in the rate of tax on dividends from the current rate of 15 per cent,” Holness said in his keynote speech on Tuesday at the Jamaica Stock Exchange’s (JSE) 20th Regional Investments & Capital Markets Conference.

Jamaica reinstated a 15 per cent withholding tax on ordinary dividends in April 2013, as part of fiscal reforms implemented under an agreement with the International Monetary Fund (IMF).

The prime minister’s announcement comes two months after he told the private sector that the Government planned changes to encourage asset owners to repatriate their holdings to Jamaica.

“We are committed to further simplifying tax structures and streamlining processes to reduce compliance burdens and foster growth. We are exploring tax legislation to incentivise the repatriation of businesses including their activities, associated assets and profits to Jamaica,” Holness added in his address at the Jamaica Pegasus hotel.

Wealthy asset owners often hold their Jamaican assets through holding companies registered in jurisdictions such as Barbados, St Lucia, the British Virgin Islands, and the Cayman Islands. While privacy is a key motivation, the primary driver is the tax advantages offered by these locations.

Under the Caricom Double Taxation Treaty, dividends paid by companies to shareholders residing in another member state are exempt from withholding taxes. Consequently, Scotiabank Caribbean Holdings Limited, a Barbadian holding company owned by the Bank of Nova Scotia (Scotiabank), will receive $1.05 billion in dividends from Scotia Group Jamaica Limited today without any tax liability.

The largest shareholders of most publicly listed companies on the Jamaica Stock Exchange (JSE) are typically entities incorporated in Caricom jurisdictions with lower tax rates. In recent years, firms such as Cargo Handlers Limited and Honey Bun (1982) Limited have seen their largest shareholders shift from individual investors to international business companies (IBCs) based in low-tax jurisdictions like St Lucia and Belize. This trend reflects a broader strategy among multinational companies across the Caribbean, which establish holding companies in these jurisdictions to minimise tax liabilities on profits distributed by operating businesses throughout the region. Consequently, individual minority shareholders of many JSE-listed companies often receive less dividend income compared to larger institutional shareholders benefiting from these tax-efficient structures.

The Ministry of Finance and the Public Service’s revenue estimates for the 2024- 2025 fiscal year (April 2024-March 2025) showed that the government projected itself to collect $30.60 billion on withholding taxes related to interest and dividends for the 2023-2024 period. The government had received $27.45 billion in withholding taxes on interest and dividends between April 2023 to December 2023. The Government was estimated that it would have collected $41.01 billion for the 2024/2025 period.

In January 2009, Prime Minister Bruce Golding removed the withholding tax on dividends paid by Jamaican companies to Jamaican residents. This policy change extended a benefit that was previously limited to companies listed on the Jamaica Stock Exchange (JSE), which had been exempt from withholding taxes on dividends. The reform aimed to provide tax relief and encourage investment within the domestic economy. Prior to this change, dividends from non-listed companies were subject to withholding tax, creating a disparity between listed and non-listed entities.

In July 2009, Jamaica imposed a 33 1/3 per cent withholding tax on dividends paid to non-resident corporate shareholders and a 25 per cent rate on dividends paid to non-resident individual shareholders. Non-resident shareholders without the protection of a tax treaty were subject to these higher tax rates.

Withholding taxes on dividends paid by companies listed on the JSE were progressively reduced from 25 per cent to 20 per cent in April 2000, then to 10 per cent in April 2001, before being eliminated entirely in April 2002. In contrast, dividends paid by private companies not listed on the JSE were taxed at 25 per cent for individuals and at 33 1/3 per cent for companies and other entities.

While Prime Minister Holness has yet to give further details on the considerations, several global bodies like the European Union (EU) and Organisation for Economic Co-operation and Development (OECD) have pressed hard on global tax reform after numerous revelations in the last decades on tax avoidance tactics by the world’s largest multinationals and wealthiest people.

The EU has been designating countries under different lists for which it deems non-cooperative jurisdictions for tax purposes. Countries on the black list (Annex II) are subject to some level of restriction from interacting with European businesses. Jamaica was once on the EU’s ‘grey list’ but was removed in February 2023 following amendments to the Special Economic Zones Act (SEZA).

Territories like Bermuda have made significant legislative reforms due to pressure from the EU and OECD. It introduced an Economic Substance Act which took effect in July 2019 and enacted the Bermuda Corporate Income Tax Act (BCIT) in December 2023. The BCIT went into effect in January 2024, but no tax was chargeable until January 2025. Companies like Ibex Limited are still assessing the impact of Bermudan legislation and OECD changes.

The OECD has proposed a global minimum tax (GMT) of 15 per cent on multinational enterprises with revenues above €750 million ($122.66 billion). This GMT has progressed in more than 55 jurisdictions with 138 countries and jurisdictions in July 2023 signing the outcome statement. That statement was meant to ensure signatories refrained from imposing newly enacted digital services taxes or relevant similar measures on any company before December 2024.

United States President Donald Trump signed an executive order (global tax deal) on Monday which clarified that the global tax deal had no force or effect in the United States of America. It’s unknown how this declaration will impact the OECD’s GMT plans.

The USA does not charge tax on qualified dividends for individuals or head of households that earn less than US$63,000 per year. The USA also offers retirement accounts like Roth IRAs which have no tax charged on dividends.