THE Fiscal Incentives (Miscellaneous Provisions) Act, 2013, otherwise known as the Omnibus Act of 2013 (the “Omnibus Act”), introduced a bevy of incentives for the benefit of certain sectors of the Jamaican economy. Included in those sectors is the tourism industry.

In order for a villa or hotel to benefit from the incentives introduced by the Omnibus Act, the business must be an approved tourist undertaking and licensed under Section 2 of the Tourist Board Act.

An “approved tourism undertaking” is an undertaking which the Minister of Tourism is satisfied is, or will be, a hotel or resort cottage, and then declares by gazetted order to be an approved tourism undertaking for the purposes of the Tourist Board Act.

The Omnibus Act amended the Income Tax Act, General Consumption Tax Act, and Customs Act. The Omnibus Act also repealed the Hotels (Incentives) Act and the Resort Cottages (Incentives) Act.

Following the passing by Parliament of the Customs Tariff (Revision) (Amendment) Resolution, 2013, as of January 1, 2014 the customs tariffs were amended to provide for the new incentive regime proposed by the Omnibus Act.

The new incentive regime makes provision for:

1) Productive input reliefs for the tourism industry

As of January 1, 2014, certain items used in the construction and operation of hotels and resort cottages licensed under the Tourist Board Act are exempt from customs duty. These items include air conditioning apparatus, golf carts, cookware and kitchen utensils, linen, fixtures, mirrors, marble, refrigerators, tiles, audio visual equipment, and much more (a complete list can be found in the table attached to the resolution). It should be noted that the relief from customs duty on productive input imports applies on an ongoing basis so that licensed hotels and resort cottages can update, refresh and upgrade their product offerings regularly.

2) Income tax relief

The Income Tax Act was amended to stipulate that no income tax is to be charged on income derived as interest from money invested in an approved tourism undertaking.

3) Capital allowance

This means that capital expenditure on certain specified assets — including buildings or structures that form a part of an approved tourist enterprise, and incurred in a reporting year after January 1, 2014 — can benefit from a capital allowance when determining income tax payable. In accordance with the current capital allowance regime, newly constructed buildings/structures used as a hotel or villa may qualify for a 20 per cent initial capital allowance for income tax purpose as well as annual allowances for renovation varying from 4 per cent for buildings or structures primarily constructed of concrete, brick, steel, stone, cement etc to 12.5 per cent for buildings or structures primarily constructed of wood or other organic material.

4) Employment tax credit (ETC)

This is an income tax credit which is allowed to an eligible person, for example, an employer engaged in the rental of a licensed tourist accommodation. The ETC allows employers who have paid over all PAYE and education tax to Tax Administration of Jamaica, and made all due contributions to the National Insurance Scheme, National Housing Trust and under the Human Employment and Resource Training Act on behalf of its employees, to benefit from a credit of up to 30 per cent of the total of any tax assessed as payable in respect of the profits or income of the eligible person during the assessment period. ETC benefits employers who preserve and maintain their employees’ statutory obligations, and allows a business to increase its after tax profit.

5) Lower effective rate of income tax

A lower rate of corporate income tax of 25 per cent is available for approved tourism undertakings.

6) Lower rate of GCT

Hotels and villas that are licensed will have the benefit of a lower rate of General Consumption Tax (GCT) of 10 per cent for as long as they remain approved tourism undertakings. This also has a knock-on effect of reducing the amount payable by the customer of the approved tourism undertaking.

Therefore, there are a host of benefits available to hotel and villa operators in the country. An interested party may apply to be an approved tourism undertaking by submitting an application to Tourism Product Development Company Limited and paying the prescribed application fee.

Under the Tourist Board Act, any person who operates a tourist accommodation without being licensed by JTB shall be guilty of an offence and liable on conviction to a fine or imprisonment.

If you are interested in learning more about fiscal incentives applicable to approved tourist enterprises, you should reach out to Jamaica Tourist Board or contact an attorney for assistance.

Luke Phillips is an associate at Myers, Fletcher & Gordon, and is a member of the firm’s commercial department. Luke may be contacted via Luke.Phillips@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.