THE Cabinet has given approval for the Income Tax Act to be amended to facilitate the payment of a tax-free honorarium of up to $200,000 to employees affected by Hurricane Melissa.

The amount can be paid by employers in one tranche or in several payments up to March 31, 2026.

This is the first of its kind in Jamaica and, according to Minister of Finance and the Public Service Fayval Williams, it will become policy during periods of natural disasters.

Williams, who made the announcement during Tuesday’s sitting of the House of Representatives, explained that Cabinet approved the proposed amendment to the Income Tax Act to “facilitate a relief support regime that allows for a non-taxable treatment of disaster relief honorarium made by employers to employees during periods in which a declaration of disaster has been issued pursuant to Section 20 of the Constitution of Jamaica and or Section 26 of the Disaster Risk Management Act”.

Hurricane Melissa slammed into Jamaica’s south-western parishes at Category 5 strength on October 28, devastating businesses, destroying homes, and throwing thousands out of work. It left behind an estimated US$8.8 billion in damage while at least 45 people were killed.

Williams explained that the current legal framework governing the taxation of employment income does not provide a structured mechanism through which temporary disaster relief payments from employers to employees are exempt from income tax.

She noted that there is no statutory provision that exists where disaster relief payments may be accorded non-taxable status on a consistent or system-wide basis following a declared disaster.

According to Williams, her ministry has implemented and operationalised an employee support and relief programme to support one-off, or a limited series of disaster relief payments.

“This programme permits employers to provide an honorarium either… without incurring statutory liability for either the employee or the employer,” said Williams.

The finance minister explained further that given Jamaica’s frequent exposure to climate-related disasters, “the current measure is insufficient as a long-term solution due to its temporary nature”.

She noted, “In the absence of an explicit statutory exemption, such payment risks being classified as taxable emoluments in future periods, resulting in legal ambiguity, administrative inconsistency, and inequitable treatment across employers and sectors. As a result, a legislative amendment is required to provide appropriate statutory provisions for the treatment of these payments.”

The finance minister emphasised that existing fiscal tools such as discretionary waivers, write-offs and ministerial remission are inadequate for the high-volume, time-sensitive nature of disaster-related income support.

She pointed out that these mechanisms cannot be deployed at the scale or speed required during a declared disaster.

Williams told the House that under the proposed regime, disaster relief payments will be recognised as non-taxable only where they are provided strictly for personal recovery, welfare of household needs and are not connected in any form to employment services, performance, compensation arrangements or ongoing remuneration.

“This ensures that the exemption is narrowly targeted and limited to situations where financial assistance is required to safeguard the welfare of employees facing an abrupt loss of income, housing or essential goods,” she added.

Of particular note is that the exemption will apply solely to cash payments, thereby avoiding interpretational ambiguity associated with in-kind benefits, allowances or fringe benefits that may otherwise fall within the statutory definition of emoluments.

Williams said the Government was mindful of safeguarding fiscal integrity and potential abuse, with the plan including a prescribed cap to be determined by the minister.

This is intended to strike a balance between providing meaningful support to affected workers and maintaining the principled structure of the income tax system.

Williams also pointed out that the amount covered under the relief is aimed at minimising revenue risk while ensuring that the exemption remains appropriately limited in nature, duration, and fiscal impact. It will also be limited to the period during which the disaster declaration remains in force.

Significantly, the finance minister stressed that the relief to be offered “is expected to generate positive secondary economic and fiscal effects by increasing the disposable income and short-term purchasing power of affected individuals. This would enable households to meet immediate consumption needs.

“The increase in consumption is anticipated to stimulate demand within the formal economy and consequently support additional tax revenue through GCT [General Consumption Tax] and other related fiscal flows”, she said.

And while the honorarium will be non-taxable, the associated increase in economic activity is expected to contribute to overall revenue collection during the period of relief.

Williams pointed out that payments of the tax-free amounts must be reported alongside monthly payroll submissions to Tax Administration Jamaica, and employers must maintain contemporaneous documentation evidencing the purpose, amount, timing, and justification for each payment.

Minister of Finance and the Public Service Fayval Williams, making a statement in the House of Representatives on Tuesday. (Photo: JIS)