Businesses Urged to File for Employment Tax Credit

Local businesses and entrepreneurs are being urged to file and pay their monthly payroll statutory deductions on time in order to qualify for Employment Tax Credit.

Director of Communications at Tax Administration Jamaica (TAJ), Meris Haughton, says Employment Tax Credit is an incentive designed to achieve greater compliance in the filing of taxes, in full and on time.

“So for January, that payment would be due by February 14. So each month we will look to see that the person has declared the amount and paid it over on time. Once that is done, then they are entitled to that credit when they are filing their annual Income Tax Returns,” she explained to JIS News.

Under the mechanism, which took effect on January 1, 2014, entrepreneurs and business entities classified as ‘unregulated’ will be able to claim a non-refundable Employment Tax Credit, when computing their net income tax liability.

Miss Haughton said the move targets entrepreneurs and business entities that are engaged in various trading or professional engagements and who may have had some difficulty in the past in filing taxes and paying on time.

She told JIS News that the amount of Employment Tax Credit that can be claimed for any one year of assessment, will be equivalent to the total amount of payroll deductions and contributions for Education Tax, National Housing Trust (NHT), National Insurance Scheme (NIS) and Human, Employment and Resource Training (HEART), which have all been declared and paid on time for employees during that year.

Eligible persons are therefore encouraged to file and pay their monthly payroll deductions (S01) on a timely basis, in order to benefit when filing their final income tax returns.

“Payment from payroll is done monthly and since there are 12 months in the year what you do is total the yearly payment and that’s the potential of what they can be entitled to. The total from Education Tax, NHT, NIS and HEART,” she noted.

Miss Haughton said that the move is a ‘win-win-win’ for everyone involved employer/entrepreneur, employee and government. She said that employees will also gain through the delivery of benefits from the NHT and the NIS.

Miss Haughton pointed out that the applicable Employment Tax Credit will be restricted to 30 percent of the tax that is chargeable on the income of the company or trader.

In addition, she said, the credit may not be claimed against any income tax chargeable on non-trading income, such as interest and dividend income, as income in that category will continue to attract a tax rate of 25 percent.

She noted that while some business establishments will benefit from the Employment Tax Credit, it will also serve to encourage greater tax compliance and satisfy one of the major thrusts of the government, which is to boost employment.

The Employment Tax Credit is being introduced as part of the government’s Fiscal Incentive regime and follows several months of discussion by a private sector led ‘Incentives’ Working Group, partnering with representatives of the Ministry of Finance and Planning and TAJ.

By Rodger Hutchinson