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Update on new Income tax threshold effective July 1, 2016

The objective 

The 2016/17 Revenue Measures outlined to the House on the May 12, 2016, in which the Minister of Finance and the Public Service (MoFP) asked the Honourable House to consider an increase in the personal income tax threshold from $592,800 to $1,000,272 effective July 1, 2016 and to a further $1,500,096 effective April 1, 2017. The measure is recommended on the grounds that it will provide low income earners with additional disposable income.

The revenue measures covered

(1) An increase in the personal income tax threshold from $592,800 to $1,000,272 for year of assessment 2016.

(2) An increase in the personal income tax threshold from $1,000,272 to $1,500,096 for year of assessment 2017

(3) The Income Tax Rate of 30% on statutory income in excess of $6,000,000. 

 

Legislation affected

oThe Income Tax Act is amended to form the legislative framework. 

o Unless otherwise stated, all reference is to the Income Tax Act.

o Income Tax Order 

 

The main amendments to the act

Section 30 of the Income Tax Act will be amended to impose the tax rate of 30% per annum on income in excess of $6,000,000 and to provide for the increased threshold of $1,000,272 and $1,500,096 for 2016 and 2017 respectively.

 

For more information you  may contact us, here at Bogle and company or your local tax administration office.

Garnishment Policy now in effect at TAJ

In its continued efforts to identify and bring tax evaders and avoiders to book, TAJ has now employed another strategy to bolster its enforcement and compliance activities with the introduction of Garnishment.

Garnishment refers to a process where a “Notice is served on a person for the purpose of legally seizing money belonging to a debtor”. Garnishment has always existed under the laws of Jamaica. However, the concept has now been incorporated into the Tax Collection Act (the TCA). Where taxes are owed, Section 40B of the TCA allows the Commissioner General, TAJ, to issue a Notice of Garnishment and have it served on a third party. Garnishment, will only be done when the Commissioner General is unable or unlikely to be able to collect from the tax debtor himself.

Garnishment may be pursued where the taxpayer owes taxes and the Commissioner General is unable to collect from the tax debtor and is unable to make a satisfactory arrangement for the payment. The Commissioner General must determine or have reasonable cause to believe that a third party holds, controls or has custody of money belonging to the tax debtor or the third party is liable to make a payment to the tax debtor or the third party will, within one year, be liable to make a payment to the tax debtor.

Outstanding money is recovered using a Garnishment Notice which informs a third party that he/she is required to pay over to the Commissioner General, monies belonging or due to the tax debtor, for the satisfaction of the tax debtor’s debt. A Garnishment Notice does not require a court order to be effective.

The Garnishee, that is, the person to whom a Notice is issued, may be any third party who is the holder, controller or custodian of monies belonging to a tax debtor. This includes:







 

  • Lawyers
  • Banks and financial institutions
  • Lessees and tenants
  • Third parties involved in trading or contractual relations with the taxpayer
  • Employers

To date, TAJ has served four (4) Garnishment Notices which have yielded positive results in terms of formalizing arrangements for the monthly collection of outstanding sums. It is expected that this mechanism will be used more rigorously in the future.

 

 







New Income Tax threshold effective January 1, 2016

A new income tax threshold of $592,800 per annum comes into effect in the New Year on January 1, 2016, moving up from the current tax-free amount of $557,232.

The increase in the threshold means that the corresponding tax-free portion to be used by employers, as of January 2016, in making periodic payments is as follows:

$11,400.00 Weekly
$ 22,800.00 Fortnightly
$ 49,400.00 Monthly
$148,200.00 Quarterly





Employers are advised to make the necessary adjustments to their payroll system to reflect the increase in the threshold, so that all employees may benefit from the increase.

In addition to employees, all individuals resident in Jamaica, whether self-employed or pensioners will also benefit from the increase in the income tax threshold.

With the increase in the threshold, the tax paid per annum by each individual will reduce by $8,892.00 (i.e. 592,800 – 557,232 = $35,568 x 25%), while the net effect for each individual per quarter will be a reduction in tax of $2,223.00 and $741.00 per month. The public is reminded that income in excess of the threshold will continue to be taxed at 25%.

Self-Employed individuals are advised that the new threshold of $592,800 is to be used to file their estimated income tax return for the 2016 year of assessment, due March 15 and to make payments for the same year in four equal instalments by March 15, June 15, September 15 and December 15 of each year. However, the threshold of $557,232 is to be used in filing the annual tax return for year of assessment 2015, which is also due on March 15, 2016. Pensioners and persons sixty-five and over are reminded that in addition to the threshold they are entitled to a pension exemption of $80,000 and an age exemption of $80,000 respectively.

The Environmental Protection Levy (EPL)

The Environmental Protection Levy (EPL) which took effect on June 1, 2015, required domestic manufacturers to remit returns not later than July 31, 2015. Arising out of a series of consultations with key stakeholders, GOJ has revised the filing of returns by manufacturersby the last working day October, 2015. Consistent with the new Act, domestic manufacturers are being advised to pay careful attention to the conditionalities of the Income Tax Act:

  • Pursuant to Part III of the First Schedule of the Income Tax Act:
    • Persons who are engaged in the transformation of raw materials or intermediate goods into a new or distinct good are manufacturers and must charge the EPL (the EPL must be charged whether or not you are currently registered with Ministry of Industry, Investment and Commerce (MIIC). ·
  • All manufacturers are permitted to account for the EPL imposed effective June 1, 2015 on their September quarterly return due on the last working day of October 2015. ·
  • Manufacturers who incurred EPL at the ports on productive inputs, which have been used, or are to be used in the manufacturing process, will have the EPL paid, available as a credit when accounting for the tax on their return in October 2015.
  • Manufacturers who purchased goods from local manufacturers for use in their production process and paid the EPL are eligible for a credit when accounting for the tax.
  •  

Withholding Tax on Specified Services

The Ministry of Finance and Planning is advising that the Withholding Tax on Specified Services which took effect June 1, 2015 will be implemented on September 1, 2015. The Withholding Tax on Specified Services targets persons liable to income tax but are noncompliant
and/or may not be in the tax data base.

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