On 7th March, the Minister of Finance and the Public Service, Dr. Nigel Clarke, announced a stimulus package that is estimated to yield a net reduction of taxes of approximately JA$14 billion dollars. The Minister argued the economic benefits to be derived from the tax reforms, including protecting small businesses, encouraging entrepreneurial activity, removing fiscal barriers to obtaining financing, and maximizing the regularization and leverage of land.
The six key reforms can be summarized as follows:

• Increase in Turnover Threshold required for registration to pay General Consumption Tax (GCT) from JA$3 Million to JA$10 Million.
• Replacement of all ad valorem Stamp Duty payable on any instrument pursuant to the Stamp Duty Act, including security documentation for loans, with a stamp duty at a flat rate of JA$5,000.00 per document.
• Reduction in the rate of Transfer Tax payable on the transfer of property from 5% to 2%.
• Increase in the Transfer Tax threshold applicable to the estate of deceased persons from JA$100,000 to JA$10,000,000.00.
• Abolition of the Asset Tax payable by non-financial institutions.
• Abolition of the Minimum Business Tax of $60,000.00 per annum.

The implications of the reforms are far-reaching. According to the Minister they have been crafted to not only stimulate the economy but to grant relief to those who are most adversely affected by high transactional costs associated with engaging in economic activity, seeking financing and administering estates. The tax reforms present a wide range of opportunities discussed below:

1. Increase in GCT Turnover Threshold
The GCT Turnover Threshold is the amount of gross revenue that a person engaging in taxable activity can generate before becoming eligible for payment of GCT on that activity (such as provision of goods/services). With the increase from $3 million to $10 million, it is suggested by the Minister that a small business has more room to grow and strengthen – as they will be able to generate gross revenue up to $10 million before being required to register for GCT, charge GCT on their transactions and file monthly GCT returns.

2. Abolition of Asset Tax and Minimum Business Tax
The abolition of both the asset tax on non-financial institutions and the minimum business tax is aimed at reducing the tax burden on businesses but in particular for small and micro businesses. It has been long suggested that these taxes have served to complicate filings and payments required by businesses without taking into account any realistic consideration of their size, industry, growth potential or profitability.

Impact & Opportunities:
Small businesses or traders with a gross revenue between $3 million and $10 million – estimated by the Government at approximately 3,500 persons – stand to benefit the most from the new GCT threshold. However, it will also benefit customers who can obtain goods or services from businesses falling below the threshold, as they will not need to pay GCT on purchases/transactions with these businesses. In addition, new persons who begin engaging in economic activity will enter the market knowing they will have some room to grow before being formally incorporated into GCT system.
With the abolition of asset tax on non-financial institutions and the minimum business tax, the Government is seeking to create a more hospitable economic environment for SME’s and thereby encourage entrepreneurship.

Interested in starting a business or incorporating a new company to take advantage of the measures designed to improve the economic environment for small businesses and entrepreneurs? Call any of our Attorneys in our Commercial Department:
- Afeef Lazarus
- Warrington Williams
- Basil Parker
- Lisa Williams
- Alexander Corrie

3. Flat Rate Stamp Duty
The replacement of ad valorem tax (percentage-based tax) with a flat rate for Stamp Duty of $5,000.00 on all instruments covered by the Stamp Duty Act, will impact a wide cross-section of transactions including sale of real estate, sale of shares, mortgages and administration of estates. The most significant impact will certainly be felt in the case of sale of real estate. Customarily, in the sale of real estate, the stamp duty (formerly charged at the rate of 4%) would be shared equally between the buyer and seller. This reform therefore represents a significant reduction in cost to both buyer and seller.

4. Reduction in Transfer Tax to 2%
The reduction in Transfer Tax on the sale of land from 5% to 2% is a welcome tax relief which will no doubt delight persons currently engaged in property transactions and may provide strong encouragement for future transactions. The real estate market derives a profound benefit from the combined reduction in Stamp Duty and Transfer tax – cutting the tax burden of the parties from a total of 9% to 2% of the property value. But the benefit doesn’t stop at real estate. The reduction also applies to transfers of shares and may result in increased activity and interest in our burgeoning stock market.

Impact & Opportunities:
In the real estate market – vendors will find it cheaper to sell property with their tax burden reduced from a cumulative 7% to 2% of the property’s value. Purchasers will have their share of costs (formerly 2%) removed almost entirely. Purchasers who access mortgage financing will also derive an added benefit from the fixed rate stamp duty on mortgages, making the transaction that much more affordable.

There is also potential for the overall real estate market to be impacted by the tax reforms. Vendors, who bear sole responsibility for payment of Transfer Tax, may be inclined to reduce their asking prices in light of their significantly reduced tax burden. This could result in making properties generally more affordable and thereby open the market to more purchasers.

In addition, property transfers by gift or for minimal consideration, often between family members, will become more affordable and may encourage families to transfer land during their lifetime rather than through the oftentimes lengthy process of administration of estate.

Considering buying, selling or making a gift of property to take advantage of the low cost of property transfer? Call any of our Attorneys in our Real Estate Department:
- Afeef Lazarus
- Warrington Williams
- Basil Parker
- Gisele Gibson
- Lisa Williams
- Alexander Corrie

5. Increase in Transfer Tax threshold for estates
Currently, where the estate of a deceased person is being administered in Jamaica, the first $100,000.00 worth of assets being transferred to beneficiaries (after deduction of expenses) is exempt from transfer tax on death. The threshold has now been increased, enabling estates to proceed transfer tax free on up to $10,000,000.00 asset value. It is intended that this measure will enable many estates, (caught in the purgatory of inability to transfer assets due to inability to pay taxes) to complete administration and transfer property to long-suffering beneficiaries.

Impact & Opportunities:
Small estates with limited assets can be caught in the difficult position of being unable to satisfy the taxes payable for administration which consequently prevents those estates from being properly and completely administered in a timely manner. This is particularly the case where assets, such as a family home, are not easily liquidated or where doing so would be detrimental to beneficiaries of the estate. The increase in the threshold should enable more estates to take advantage of the exemption from Transfer Tax on the transfer of property up to a value of $10,000,000.00.

Do you have an estate to administer? Are you a beneficiary who would like to complete a transfer of estate property? Call any of our Attorneys in our Estate and Administration Department:
- Afeef Lazarus
- Annette Francis-Barnett
- Gisele Gibson
- Roxanne Kidd-D’Aguilar

It goes without saying that tax cuts and reductions are always welcome by both individuals and the business community - whether the economy is developed or developing. Importantly, the suite of tax reforms proposed by the Minister are targeted for impact on specific areas of the economy to generate growth and stimulate economic activity. Whether a benefit to the overall economy will be achieved is yet to be seen, but on a micro economic level, the average citizen, sole trader, small businesses or commercial conglomerates wait with great expectancy.