MANY businesses in Jamaica dread tax season, but what if filing your taxes could actually save you money?

According to tax consultant Dr Kesha Christie, too many entrepreneurs are running from the very system that could help their businesses grow. From employee tax credits to capital allowances and research incentives, she says being compliant could mean thousands of dollars back in your pocket.

“Most people feel like taxation is a burden, whilst we have a lot of incentives that are available that can drive innovation, improve their cash flow and stimulate growth,” said Dr Kesha Christie, CEO of KCLH Full Business Solutions.

Dr Kesha Christie, who operates a business consultancy and tax services firm, detailed in an interview with the
Jamaica Observer, that if businesses are compliant, there are several benefits they can access through tax allowances. She explained that to qualify, a business must be formalised and compliant, as this opens the door to greater assistance, proper record keeping, and access to capital allowances that can be used as an investment strategy. Most importantly, she said, businesses should partner with a tax expert to ensure their taxes are filed properly in order to reap these benefits. Some of the incentives available can help to reduce overall income tax liability and vary depending on the size of the business. A micro business is typically one earning below $15 million in revenue, a small business up to $150 million, and a medium-sized business up to between $500 million and $1 billion. Allowances are tailored to these categories, though some apply across all business types. One key example is the Employee Tax Credit, an incentive for timely payroll compliance. Once a business falls within one of these brackets, employs staff, and pays its taxes on time and in full for the calendar or financial year, it can qualify for up to 30 per cent of its income tax liability or 30 per cent of the taxes paid, whichever is lower. However, Dr Christie noted that this benefit does not apply to businesses without employees. She added that the corporate tax, or small business income tax credit, applies to companies earning less than $500 million annually. By filing their taxes, these businesses automatically qualify for a tax credit of up to $375,000, a direct reduction from their overall tax bill. Another key incentive is the loss carry-forward relief, which allows businesses that record a loss in one year to carry that amount forward to offset future taxable profits, thereby reducing their tax liability in subsequent years.

“A lot of people want to say that they are not making a profit and are at a loss, and they decide to not file taxes,” she told the Business Report. “You have a loss carried forward relief as an amount that goes forward as long as you have a loss.”

She explained that this incentive works at the discretion of the tax office, which may allow a business to carry forward either the full or a portion of its loss to offset future profits. For example, if a business records a $1 million loss this year and earns a $2-million profit in the following year, the tax office may decide to apply 50 per cent of that loss — or $500,000 — to reduce the tax liability. While the percentage applied can vary, Dr Christie noted that the lowest amount typically allowed is 50 per cent, resulting in a reduced tax burden in the subsequent year.

“I always encourage people that even though you have a loss, always be compliant and report that loss because there is a carried-forward relief that is available to you,” she said.

Capital allowance is another general incentive available to businesses that purchase machinery or equipment for their operations. Dr Christie explained that companies can claim up to 40 per cent in capital allowance within a single year, reducing their overall income tax liability.

She added that businesses are also eligible for an initial allowance of 25 per cent on certain machinery the first time it is placed on the tax register. After that, they can claim an annual allowance of up to 15 per cent on the remaining amount each year until the full cost of the asset is written off.

“It makes sense to have proper record keeping when bringing in items and to maintain a fixed asset register, so you will know the time when your items were bought, and you put it on the tax net so you can take advantage of the allowances afforded to you,” Dr Christie encouraged.

While none of these incentives represent direct capital, Dr Christie explained that they ultimately reduce the amount of taxes a business pays, allowing it to claim more expenses. As a result, a company may either have a carried-forward loss or, in some cases, the government may owe the business a refund.

“The process for a refund is that the tax office will audit your books before issuing those monies,” she cautioned.

For businesses focused on research and development (R&D), Dr Christie highlighted that there is a special incentive that allows for a tax reduction of up to 125 per cent of related expenses. These expenses can include costs associated with conducting research, transportation, and professional services. To qualify, however, the business must provide proof that its innovation or idea is novel and has not been done before. She added that smaller businesses can also benefit from the GCT exemption threshold, which allows them to save more by being exempt from charging or paying General Consumption Tax once they remain below a certain revenue level. Dr Christie further clarified that there is no truth to the belief that businesses are exempt from filing taxes during their first few years of operation. She strongly encouraged all businesses, even those operating at a loss, to file their taxes every year, noting that it is a mandatory requirement.

“Bar none,” warned Dr Christie. “Failure to file means you won’t get your tax compliance certificate, and this can catapult you to interest, penalties and all types of surcharges.”

Small and medium enterprises with revenues between $15 million and $500 million can access the Productive Input Relief programme, which offers reductions in GCT at customs and duty-free importation on manufacturing and agricultural inputs. Dr Christie noted that this benefit is not available to micro enterprises. For larger or medium-sized companies earning over $1 billion in revenue, she pointed to the Jamaica Stock Exchange incentive, which grants a 100 per cent income tax exemption for the first five years for companies listed on the Junior Market, followed by a 50 per cent exemption for the next five years. Businesses operating within Special Economic Zones also benefit from a reduced income tax rate of 12.5 per cent instead of the standard 25 per cent, in addition to customs and GCT relief. Meanwhile, under the Pioneer Industries Act, medium-sized enterprises that introduce innovative ideas can receive special tax incentives based on the projected economic impact of their operations. Although this incentive does not specify a defined income tax rate, it rewards businesses that contribute to innovation and national development.

“We have seen that there are a lot of companies out there, but they are not aware of the actual tax benefits or what information to file in order to take advantage of these allowances,” she said.

It is important for businesses to work with someone knowledgeable who can properly prepare and file their taxes to ensure they benefit from available allowances. A tax partner should advise on which documents to keep in order to reduce tax liability. Dr Christie noted that while the tax office usually provides information on paying taxes, the timing of filings, and associated penalties, it rarely educates businesses on the various allowances. Instead, this information is typically shared in specialised industry spaces.

CHRISTIE… we have seen that there are a lot of companies out there, but they are not aware of the actual tax benefits or what information to file in order to take advantage of these allowances.