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What is Income Tax?
Income tax in Jamaica is a tax on the income earned by individuals and businesses. It is based on a progressive system, where those who earn more income pay a higher percentage of tax. The tax rates for individuals range from 0% to 30%, depending on the income level. Corporate income tax rates differ based on the level of regulation, with most regulated companies having a rate of 33.33%, building societies at 30%, and unregulated companies at 25%.
The Jamaica Tax Administration collects income tax on behalf of the government, which is then used to fund public services and infrastructure projects. Failure to pay income tax can result in penalties and legal action.
What is PAYE in Jamaica?
The Pay As You Earn (PAYE) system in Jamaica is a method of income tax collection where employers deduct taxes from their employees’ salaries and remit it to the government on their behalf. This system ensures that income tax is paid regularly, reducing the burden on individuals to make lump sum payments at the end of the financial year. The amount of tax deducted depends on the employee’s income level. In Jamaica, PAYE is a significant source of revenue for the government and plays a crucial role in financing public services and infrastructure.
Who Pays Income Tax in Jamaica?
In Jamaica, individuals who earn an annual income above a certain threshold (Income Tax Threshold) are required to pay income tax. This includes employed individuals, self-employed individuals, and those who earn income from rental properties or investments. However, there are certain exemptions and deductions available that may lower the amount of tax owed.
The Income Tax Threshold in Jamaica is currently at $1,700,088 annually ($141,674 monthly), therefore, if you earn more that this, you pay income tax on the amount greater than $1,700,088 annually. N.B. The figure for the threshold can change, therefore ensure that you have the most current figure when calculating your income tax.
On the other hand, those who earn below the threshold or who are exempt under certain circumstances, such as retirees or those with disabilities, are not required to pay income tax in Jamaica.
Also, please note that Jamaican residents are subject to income tax on all earnings, regardless of their location in the world. Additionally, income tax is charged on all income earned within Jamaica, regardless of residency status or domicile.
How is PAYE Calculated in Jamaica?
Employees
Calculating income tax in Jamaica is a relatively straightforward process. The first thing you’ll need to do is determine your taxable income:
- Add up all the income you earned during the month, such as your salary or wages, bonuses, and commissions.
- Subtract NIS, pension and any other allowable deductions, such as an Employee Share Ownership Plan.
- You now have your taxable income.
Example:
- Total Income (Monthly): JMD 208,333.33
- NIS: JMD 6,250
- Pension (5%): JMD 10,416.67
- Taxable Income = 208,333.33-6,250-10,416.67 = JMD 191,666.66
Once you have your taxable income, you can use the tax brackets and rates provided by the Jamaican government to calculate your income tax.
To calculate your income tax, you’ll need to multiply your taxable income by the applicable tax rate for each tax bracket. For example, if your taxable income is JMD 191,666.66 for the month:
- you’ll pay 0% on the first JMD 141,674 (JMD 0),
- and 25% on the remaining JMD 49,992.66 (JMD 12,498.17).
- Your total income tax for the month would be JMD 12,498.17.
OR you can just use our Salary Calculator to determine your PAYE…it’s much easier.
N.B. For an annual income that is greater than $6 million, the amount in excess of the $6 million is taxed at 30%.
Self-Employed, Businesses & Companies
Calculating income tax for self employed persons, businesses and companies can be a bit complex, as the steps to determining their taxable income is different from that of an employee.
Use these steps as a guide, but please contact a professional (e.g., an accountant) to ensure that you are calculating the income tax correctly:
- First, determine the total income for the month. This includes all the money earned through the business/company, including sales, services rendered, and any other income streams. Be sure to keep track of all your earnings in a record-keeping system.
- Next, calculate the allowable expenses. This includes all the expenses incurred while running the business/company, such as rent, utilities, supplies, and marketing costs. These expenses can be deducted from the total income to arrive at the taxable income.
Once you have your taxable income, you can use the tax rates provided by the Jamaican government to determine your tax liability.
Income Tax in Jamaica
Check out the Income Tax Act of Jamaica here.
We hope the information in this article helped to answer your questions about Income Tax in Jamaica. If you still have queries, please leave a comment below and we’ll do our best to respond in a timely manner.
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