Jamaica Wooing Multinationals

Filed under: Business |
Peter Phillips photo

Jamaica’s Finance Minister Peter Phillips

Jamaica is making adjustments to its tax regime to enhance its attractiveness for international business entities looking for a home in the Caribbean.

A bill encouraging overseas companies to establish their head offices in Jamaica, and to exempt officers of such companies from the payment of income tax, was passed in the House of Representatives on Tuesday.

The Bill – The Income Tax (Amendment) Act – was piloted by Minister of Finance and Planning, Dr Peter Phillips and, having been passed without any amendments, is on its way to the Senate for approval.

In his remarks, Phillips noted that the Bill exempts persons, who are not residents of Jamaica and who perform group head office activities, from the payment of income tax.

“The point to note here is that not all activities of all foreign corporations are being exempt by this bill. The purpose of the bill is to provide incentives for large international corporations operating in multiple jurisdictions to move their activities to Jamaica. We are not giving up anything that we now have, rather it is seeking to attract additional economic activities to the country and expand the pool of tax over time generally, by virtue of these activities,” the finance minister said.

He added that any entity approved will be subjected to an approval process where it will need to meet the criteria for carrying out group headquarter activities, being incorporated in Jamaica and ensuring that at least 30 percent of its staff members are Jamaicans.

The bill defines an approved group head office company as an entity or other body corporate that operates in Jamaica and other parts of the world and establishes its head office and performs, among other activities, the supervision, management or monitoring of its operations; accounting, data processing, engineering, and other technical support; centralised treasury management and similar funding activities; and other such activities, as may be specified by the minister, by order, published in the Gazette.

A company or other body corporate may apply to the minister, in the prescribed form and manner, for a certificate designating it as an approved group head office company.

The Bill also imposes an obligation on a group head office to notify the Minister in writing, at least 90 days before the cessation of employment of every employee to whom the exemption is given.

Meanwhile, Phillips informed that regulations are being drafted to address the audit and assessment methodology to be used in ensuring that the entity is operating in keeping with the Income Tax Act as it relates to the anti- tax avoidance measures and the arm’s length principle.

“In that regard, Cabinet also approved the introduction of transfer pricing rules which will be used to address any tax related transactions where the arm’s length principle is applicable,” the finance minister noted.

Phillips also informed that the regulations in respect of the auditing and assessment methodology should be available by the end of October 2012.

“The transfer pricing rules are at the discussion stage, with one of the multilateral agencies offering assistance in drafting the rules. Until transfer pricing rules are introduced, the arm’s length principle in the Income Tax Act will be applied,” the finance minister said.

The measure also received support from opposition spokesperson on finance, Audley Shaw, who noted the possibility for the improvement and expansion of investment in infrastructure.

“If we can attract more companies that will not just come to Jamaica and maybe rent office space, but eventually put up their own permanent building, which in itself becomes a new sign of commitment to permanence in their investment in Jamaica, then that will add further value to our economy,” Shaw said.