(Extracted from Daily Observer - May 18, 2015)
TAX Administration Jamaica (TAJ) is advising that, after careful consideration, withholding tax on specified services will now be implemented on June 1, 2015.
The new measure, which will be introduced on a phased basis, is expected to broaden the tax base, increase reporting compliance and improve revenue collection, the agency said.
Currently, only government ministries, departments and agencies, as well as financial institutions regulated by the Financial Services Commission and Bank of Jamaica, tourism operators, utility, and cable companies grossing over $500 million will be required to withhold three per cent from payments made on specified services on invoice value of $50,000 or more.
In a statement to the media, the TAJ explained that, notwithstanding the withholding of the three per cent income tax, those from whom the tax is withheld are still obligated to file annual and estimated income tax returns and meet their quarterly obligations.
"They will however be able to claim as an income tax credit, amounts certified as being withheld against their quarterly and final obligations. Any excess credit is refundable on the final return," TAJ said.
It explained further that the withholding tax on specified services is aimed at "capturing persons liable to income tax but who are under-reporting or not registered".
The concept of withholding tax is not new to Jamaica. This mechanism is being used in other areas such as in relation to employment PAYE, payment to non-residents, Contractor's Levy, and GCT on government purchases.