Advanced Taxation: Specialized Businesses

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Questions and Answers

What percentage initial allowance is available for businesses working with wasting assets?

  • 15%
  • 10%
  • 25%
  • 20% (correct)

How is the annual allowance calculated for a wasting asset?

  • Using the fraction where the numerator is the current output and the denominator is the total potential output (correct)
  • By taking the greater of the output fraction or 1/10th of total output
  • By summing the initial allowance and future output
  • By using the total costs of the asset divided by 20

Which entities are exempt from the Contractors Levy as per the Contractors Levy Act?

  • Private sector companies
  • Construction firms involved with subcontractors
  • Ministries or departments of government (correct)
  • Partnership businesses

What is the levy charged under the Contractors Levy Act on the gross amount payable to contractors?

<p>2% (A)</p> Signup and view all the answers

What is an allowable expense for farmers related to harvested crops?

<p>Expenses incurred in the planting of the crops (D)</p> Signup and view all the answers

For tax purposes, how are animals kept by a farmer classified?

<p>As inventory or trading stock (A)</p> Signup and view all the answers

What is the gross profit tax allocation for betting and bookmaking in the gaming sector?

<p>10% (C)</p> Signup and view all the answers

Businesses that engage services of subcontractors fall under which act?

<p>The Contractors Levy Act (A)</p> Signup and view all the answers

Which legislation governs the taxation of specialized businesses in Jamaica?

<p>Income Tax Act of Jamaica (C)</p> Signup and view all the answers

What is the tax status of profits from air fares for airlines in countries with a double taxation agreement with Jamaica?

<p>They are exempt from taxation. (B)</p> Signup and view all the answers

Which of the following businesses is NOT covered under the specialized taxation provisions for mining and quarrying?

<p>Alumina companies (A), Bauxite companies (B)</p> Signup and view all the answers

How is the taxable profit for international shipping and aircraft companies without a double taxation agreement determined?

<p>Using a percentage formula of worldwide profit (D)</p> Signup and view all the answers

What is a significant feature of a mining asset as defined under Jamaica's taxation regulations?

<p>It is physically extracted and not replaceable. (D)</p> Signup and view all the answers

What approach can be taken to determine the acquisition cost of a wasting asset?

<p>Full cost approach or successful efforts approach (C)</p> Signup and view all the answers

Which type of companies are not specifically addressed under the mining and quarrying provisions?

<p>Bauxite and alumina companies (D)</p> Signup and view all the answers

What is typically used to measure the profits for a livestock farmer in Jamaica?

<p>Closing stock figure (C)</p> Signup and view all the answers

Flashcards

Shipping and Aircraft Companies (International)

Profits of shipping and aircraft companies with foreign principal places of business are taxed using a formula based on worldwide profits in relation to worldwide sales and Jamaican sales.

Double Taxation Agreements

Agreements between countries to prevent double taxation of the same income by both countries.

Mining and Quarrying (Taxation)

Income Tax Act Part VII deals with mining, quarrying, and mineral extraction, with specific rules for calculating profits, excluding bauxite and alumina companies.

Wasting Asset

A physical asset extracted and not replaceable in mining/quarrying operations.

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Full Cost Approach

A method of calculating the acquisition cost of a wasting asset in mining that considers all costs throughout the asset's life.

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Successful Efforts Approach

A method of accounting for mining/quarrying costs where only successful exploration costs are included, other costs are excluded.

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Specialized Businesses

Businesses like shipping, aircraft, mining, quarrying, etc. having distinct tax provisions in the Income Tax Act

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Closing Stock (Livestock Farmer)

Calculating profits of livestock farmers needing specific stock valuation rules.

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Mining Initial Allowance

20% of exploration and acquisition costs in the year of assessment for wasting assets.

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Annual Allowance (Mining)

Allowance based on the depletion of wasting assets and plant/machinery, calculated after initial allowance with output fraction.

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Contractors Levy

2% levy on gross amounts paid to contractors or subcontractors in their contracts.

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Contractors Levy Exemptions

Government ministries, statutory bodies, government companies, parish councils, and self-employed construction workers aren't liable to the tax.

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Farming Revenue Expenditure

Allowable farming expenses are treated like other business expenses.

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Harvested Crop Expenses

Expenses related to planting harvested crops are an allowable tax deduction.

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Livestock as Trading Stock

Farmer's livestock are treated as inventory for tax purposes.

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Livestock Purchase/Breeding Costs

Costs of purchasing and breeding animals are deductible business expenses.

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Study Notes

Advanced Taxation: Other Businesses

  • Presentation Outline:

    • Discuss rules governing specialized businesses:
      • Shipping and aircraft
      • Mining and quarrying
      • Betting and bookmaking
      • Agricultural
      • Hotel and tourist accommodation
    • Identify and discuss licenses on trades and businesses
    • Discuss contractors and contractors levy

  • Specialized Businesses: Background

    • Jamaica's Income Tax Act has provisions for specific businesses.
    • Certain areas require clarification, including:
      • How to measure international airline profits for tax.
      • How to calculate livestock farmer profits using closing stock figures.
      • Capital allowance calculation for quarry businesses.
      • Tax on gaming machines.
    • Rules for specialized businesses need to be tailored for accurate measurement and taxation.

  • Specialized Businesses: Shipping and Aircraft Companies

    • Section 48(10) deals with shipping and aircraft companies with businesses outside Jamaica.
    • Provisions apply to carriers without double taxation agreements with Jamaica.
    • Profits from airfares, freight, and mail are generally exempt if a double taxation agreement exists.
    • Taxable profits for carriers without agreements are calculated using a percentage formula: (Worldwide profit) / (Worldwide sales) x Jamaica sales income.

  • Specialized Businesses: Mining and Quarrying

    • Part VII of the First Schedule of the Income Tax Act addresses mining, quarrying, and mineral deposits (not bauxite and alumina).
    • Mining assets are physically extracted and non-replaceable.
    • Determining acquisition cost for wasting assets presents challenges.
    • "Full cost approach" versus "successful efforts approach" are discussed.

  • Specialized Businesses: Mining and Quarrying - Initial Allowance

    • Businesses working with wasting assets are eligible for a 20% initial allowance on exploration and acquisition costs (year of assessment).

  • Specialized Businesses: Mining and Quarrying - Annual Allowance

    • Annual allowance is based on wasting asset depletion and plant/machinery use.
    • Calculation involves the balance after deducting the initial allowance, and the greater of output from the current year compared to the fraction 1/20th of the total potential future output.

  • Specialized Businesses: Contractors and Contractors Levy

    • Applies to all businesses (companies, sole traders, partnerships) that are contractors or use subcontractors.
    • A 2% levy is charged on the gross amount payable to contractors/subcontractors.
    • Exemptions include government ministries, statutory bodies, government companies, parish councils, and KSAC, and work done for personal benefit.

  • Specialized Businesses: Betting and Bookmaking - Gaming Sector

    • Gross Profit Tax Allocation of 10%. Different percentages are allocated to different sectors like Consolidated Fund (Inland Revenue), BGLC, and Chase.
    • Specific tax codes and bank account numbers are listed for each sector.
    • Monthly payment due on the 7th of the following month.
    • Penalties apply for late payments, increasing with time overdue.

  • Specialized Businesses: Betting and Bookmaking - Betting Sector

    • Different percentages apply for "Local Racing & Overseas Racing" and "Sports Betting" with the same sectors (Consolidated Fund, BGLC, Chase).

  • Specialized Businesses: Betting and Bookmaking - Lottery Sector

    • Different percentages apply to various games within a lottery sector, similar structure to previous cases, with Consolidated Fund, BGLC, Chase.

  • Specialized Businesses: Agriculture

    • Profit and loss items: Revenue Expenditure.

    • Allowable expenses for farmers are based on standard business criteria for harvested crops.

    • Expenses for planting are considered allowable deductions.

    • Revenue Livestock: Trading Inventory.

      • Animals are taxed as trading stock.
      • Costs of purchased and bred animals are expenses.
      • Livestock raised for products (production herds): Animals kept for the purpose of selling their products are taxed.

    • Approved Farmer Status

  • Specialized Businesses: Hotel and Tourist Accommodation

    • Net profit calculation is standard but adjusted for taxation.
    • Unregulated companies are taxed at 25%.
    • Large unregulated companies are taxed at 30%.
    • Guest Accommodation Room Tax (GART) rates are based on room count: 1-50 rooms = US$1, 51-100 rooms = US$2, Over 100 rooms = US$4.

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