JAMAICA embarked on the goal of becoming a global logistics hub with the launch of the global logistics hub initiative in 2015. However, to give itself an advantage in competing with other countries, Jamaica implemented a range of fiscal benefits to make potential investors more interested in Jamaica. Although there are other initiatives, this article will focus on the Special Economic Zones Act, 2016 (the “SEZA”), since its goal is to attract new and diverse investments to the Jamaican economy.

Special economic zones (“SEZs”) are geographical areas designated by the minister which are aimed at providing benefits to investors to stimulate sustainable economic activity.

Before the SEZA, Jamaica had free zones under the Jamaica Export Free Zone Act. These free zones also provided fiscal benefits to what was then known as “promotors”. However, when the SEZA came into force, free zones were gradually phased out, with free zone promoters being given the opportunity to enter into master-concession or licence-agreements with the Special Economic Zone Authority (the “Authority”) within a period of four years from the appointed day.

One of the main reasons for this shift was to bring the country into compliance with the World Trade Organization (“WTO”) Agreement on Export Subsidies and Countervailing Measures by 2015.

It’s Business

SEZs are vehicles through which business can become more sustainable and more profitable.

Some of the incentives provided under the SEZ regime are customs duty relief, income tax relief (12.5 per cent on chargeable income), income tax relief on profits derived from the rental of property in the zone, stamp duty and transfer tax relief.

It is important to note that an investment in an SEZ project can look different depending on whether you are a sponsor, developer, occupant or zone user in a project.

A “developer” is defined under the SEZA as a company limited by shares that is incorporated under the Companies Act and is established by a sponsor for the purpose of entering into a master-concession or a licence-agreement. Therefore, an individual cannot become a developer under the SEZA but sponsors can incorporate a company under the Companies Act for the purposes of establishing a SEZ. This could give a sponsor, who would essentially be a shareholder in the company, more flexibility in deciding whether to be more involved in the construction of the project or not. A “sponsor” is defined by the SEZA as an investor or a consortium of investors which proposes to provide shareholder capital to finance — directly or indirectly — the business that a developer will undertake pursuant to a master-concession or a licence-agreement.

Subject to the prior approval of the minister, the Authority may enter into master-concession and licence-agreements. The main difference between these two agreements is that the land under the master-concession agreement is vested in the Authority as the registered proprietor or head lessee of the land, whereas the land under a licence-agreement is not vested in the Authority as the registered proprietor or head lessee.

In either case, the agreement is between the Authority and the developer. According to the SEZA, developers are responsible for commencing operations and the agreed construction programme of the zone at its own cost and expense. Developers are also tasked with managing, operating and marketing the zone. Therefore, the developer’s investment will go primarily towards the construction and build out of the zone.

Developers can then enter sub-concessions with occupants for the use of sites located in the zone. An “occupant” is a person, other than a developer of a zone or zone user, who conducts business in the zone under a sub-concession between that person and the developer. Notably, these sub-concessions must be in accordance with the master-concession or a licence-agreement held by the developer.

Obtaining a sub-concession under the master-concession or licence-agreement may be beneficial to investors. For instance, the occupant will not likely have to deal with the construction phase of the zone, rather they can remain focused on growing their business in thezone while benefiting from fiscal incentives.

Occupants are given further benefit under the SEZA so that if a master-concession is terminated early, the SEZA provides that occupants shall have the right to continue to operate within the zone, in accordance with their sub-concessions, until such time as a new master-concession comes into effect or the zone is closed. In the interim the Authority will assume responsibility for the management and operation of the zone. This should provide comfort for potential occupants in managing risk.

A zone user is a person who performs activities or services in a zone based on authorisation received from the Authority.

The SEZA only allows developers and occupants to benefit from the fiscal incentives under the regime. Zone users on the other hand may benefit from other Government of Jamaica incentives.

Some of the anticipated policy outcomes of the SEZ regime are to sustain linkages between the SEZ and the rest of the economy, to increase exports, and to provide competitive incentives with net benefits to the Jamaican society.

With the added benefits of being a developer or an occupant the SEZ framework provides many opportunities for business in Jamaica and has made Jamaica a more investor-friendly location, globally, to invest in.

Joshua Guiness-Brown is an associate at Myers, Fletcher and Gordon and a member of the firm’s Commercial Department. He may be contacted at Joshua.guiness-brown@mfg.com.jm or through the firm’s website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.