Advanced Taxation in Specialized Businesses

Advanced Taxation: Other Businesses

• Presentation Outline:
  • Discuss rules governing specialized businesses: shipping & aircraft, mining & quarrying, betting & bookmaking, agricultural, and hotel/tourist accommodation.
  • Identify and discuss licenses for trades and businesses.
  • Discuss contractors and contractors levy.

Specialized Businesses: Background

• Income Tax Act of Jamaica has provisions for specific businesses.
• Areas needing clarification:
  • Measuring profits of international airlines for taxation.
  • Determining closing stock figures for livestock farmers.
  • Calculating capital allowances for quarry businesses.
  • Taxing gaming machines.
• Specialized business rules need tailoring for accurate profit measurement and taxation.

Specialized Businesses: Shipping and Aircraft Companies

• Section 48(10) of Jamaica's Income Tax applies to companies whose main business is outside Jamaica.
• Provisions apply to carriers with no double taxation agreements with Jamaica.
• Air fare, freight, and mail profits from airlines with double taxation agreements with Jamaica are generally tax-exempt.
• For carriers without double taxation agreements, profits are calculated as (Worldwide Profit) / (Worldwide Sales) x Sales Income in Jamaica.

Specialized Businesses: Mining and Quarrying

• Part VII of the First Schedule of the Income Tax Act covers mining, quarrying, and wasting mineral deposits.
• This section excludes bauxite and alumina companies.
• Mining assets are physically extracted and not replaceable.
• Determining acquisition costs of wasting assets, using "full cost" versus "successful efforts" approaches, can be problematic.

Specialized Businesses: Mining and Quarrying - Initial Allowance

• Businesses involving wasting assets are eligible for an initial 20% allowance on exploration and acquisition costs during the assessment year.

Specialized Businesses: Mining and Quarrying - Annual Allowance

• Annual allowance is calculated based on the depletion of wasting assets and plant/machinery used in source operations.
• The balance after deducting the initial allowance is the annual allowance, determined by the proportion of current output relative to potential future output, or 1/20th, whichever is higher.

Specialized Businesses: Contractors and Contractors Levy

• The Contractors Levy Act applies to businesses (companies, sole proprietors, partnerships) that are contractors or use subcontractors.
• A 2% levy is charged on the gross amount payable to contractors or subcontractors under service contracts.
• Exempt from levy: government ministries/departments, statutory bodies/authorities, government-owned companies, parish councils, and KSAC.
• Construction businesses working for themselves are also exempt.

Specialized Businesses: Betting and Bookmaking - Gaming Sector

• Profit Allocation:
  • Consolidated Fund (Inland Revenue): 6.5%
  • BGLC: 2.5%
  • Chase: 1.0%
• Payment Location: Inland Revenue, BNS, NCB.
• Penalties:
  • 15% for payments up to 90 days late.
  • 30% for payments after 90 days, but within 180 days.
  • 45% or payments after 180 days, but within 270 days.
  • 60% for payments more than 270 days late.
• Due Date: 7th of the following month.

Specialized Businesses: Betting and Bookmaking - Betting Sector

• Local Racing & Overseas Racing:
  • Consolidated Fund (Inland Revenue): 1.5% of gross profit
  • BGLC: 2.5% of gross profit
  • Jamaica Racing Commission (JRC): 12.5% of gross profit
• Sports Betting:
  • Consolidated Fund (Inland Revenue): 7% of gross profit
  • BGLC: 1% of gross profit
  • Chase: 1% of gross profit

Specialized Businesses: Betting and Bookmaking - Lottery Sector

• Profit Allocation: Different percentages for each game (Cash Pot, Lucky 5, Pick 2, etc.) are allocated to Consolidated Fund, BGLC, and Chase. Specific percentages are outlined for each game.
• Payment: Amounts depend on the game and the percentage allocated to each party.

Specialized Businesses: Agriculture

• Profit and Loss items:

  • Revenue Expenditure: Expenses are based on criteria for other businesses.
  • Harvested Crops: Expenses for planting are deductible.

• Revenue Livestock:

  • Animals are treated as trading stock (inventory).
  • Purchase/breeding costs are business expenses.
  • Maintaining livestock for products (e.g., a herd) is also recorded as an expense related to the product.

Specialized Businesses: Hotel and Tourist Accommodation

• Hotel/guest house net profit is determined by standard methods with adjustments for taxation.

  • Unregulated companies: Taxed at 25%
  • Large, unregulated companies: Taxed at 30%.

• Guest Accommodation Room Tax (GART): Room rates vary based on the number of rooms (1-50, 51-100, over 100).

Explore the complexities of taxation laws governing specialized businesses such as shipping, mining, and agriculture under Jamaica's Income Tax Act. This quiz covers licensing, profit measurement, and specific provisions, helping you navigate the nuances of taxation in various industries.