Sometimes the literal interpretation is the correct one. The Minimum Business Tax (MBT) that took effect in April this year is not a tax that depends on the income, sales or assets of a business. It is payable whether or not the business has any assets, has made a profit or is even trading. It is basically a minimum recurring levy paid by businesses for being in existence.
The MBT is not the same as or a substitute for income tax. The MBT is payable in addition to income tax due and all other taxes currently paid by businesses in Jamaica. Therefore it is payable in addition to quarterly instalments of estimated/projected income tax.
The MBT is to be paid by virtually all companies (registered charities are exempt) regardless of income and even if they are exempt from paying income tax. It also applies to individuals, whether employed or not, whose gross non-PAYE revenue is $3 million or more per year. Examples of such persons may be sole proprietors of businesses and employed professionals who have obtained fees or commissions from sources other than their employer.
Payments made in respect of the MBT can be claimed as a credit against income tax due for that year. However, only individuals can claim a refund in any year that the MBT exceeds their income tax due for that year. If the excess is not refunded, then the individual can claim it as a credit against income tax due in the following year. In essence, the MBT must be paid in full each year regardless of the amount of income tax due by all affected taxpayers and companies are not entitled to a refund or rollover.
In summary, for self-employed individuals and profit-making companies it is a cash-flow issue in that, in addition to all other business taxes that have to be paid periodically, $30,000 will have to be paid on June 15 and again on September 15 of each year. The $60,000 paid can then be claimed as a credit against income tax due in the following March. For individuals, and only for individuals (i.e. companies are specifically excluded), a refund or credit may be claimed as described above if the $60,000 paid exceeded the income tax due for that year.
A penalty of 1.5% per month will be imposed if the tax is not paid by July 1 and October 1 of each year.
In April last year, when property taxes were significantly increased, in some instances by more than 150%, land owners had to decide whether it was worth the increase in annual expense to retain non-income generating land. Similarly now, companies that are not operating or are operating loss making businesses will have to ascertain quickly whether to close operations or risk not only being in a non-profit making position but being in a deepening loss-incurring state not because of borrowing or trading at a loss but because they simply continue to exist.
This article is intended to provide general information only and is not to be relied on in place of legal advice.
Ms. Roxanne Miller is an Attorney-at-Law in the Kingston office of the law firm DunnCox, located at 48 Duke Street, Kingston.You may contact her at roxanne.miller@dunncox.com