Advanced Taxation Other Businesses PDF

Advanced Taxation Other Businesses  Presentation Outline 1. Discuss the rules that govern the following specialized businesses: a) Shipping and aircraft b) Mining and quarrying c) Betting and bookmaking d) Agricultural. e) Hotel and tourist accommodation 2. I...

Advanced Taxation Other Businesses  Presentation Outline 1. Discuss the rules that govern the following specialized businesses: a) Shipping and aircraft b) Mining and quarrying c) Betting and bookmaking d) Agricultural. e) Hotel and tourist accommodation 2. Identify and discuss licenses on trades and businesses. 3. Discuss contractors and contractors levy.  SPECIALIZED BUSINESSES Background  The Income Tax Act of Jamaica contains provisions for particular businesses.  There are certain areas that need to be clarified such as:  How should the profits of an international airline be measured for taxation?  What closing stock figure is used for measuring the profits of a livestock farmer?  What capital allowance does a quarry business receive?  What is the tax on gaming machines?  In measuring and taxing the profit of specialized businesses it is necessary to have rules tailored for such businesses.  SPECIALIZED BUSINESSES Shipping and Aircraft Companies Section 48(10) of Jamaica’s Income Tax deals with shipping and aircraft companies whose principal places of business is situated outside the Island. The detailed provisions in this section would apply to carriers whose countries do not have a double taxation agreement with Jamaica. The profits from air fares, freight and mail made by airlines operating in Jamaica and whose countries have a double taxation agreement with Jamaica are generally exempt from tax. The taxable profits of carriers whose countries do not have a double taxation agreement with Jamaica are determined by a percentage formula of:  (World-wide profit) divided by (World – wide sales) X sales income in Jamaica.  SPECIALIZED BUSINESSES Mining and Quarrying  Part VII of the First Schedule of the Income Tax Act deals with mining, quarrying and other mineral deposits of a wasting nature. (This section does not apply to bauxite and alumina companies.)  A mining asset has two characteristics – it is physically extracted in operations and it is not replaceable.  Determining the acquisition cost of a wasting asset can present problems.  The “full cost approach” versus the “successful efforts approach”.  SPECIALIZED BUSINESSES Mining and Quarrying Initial Allowance  A business which involves the working of a wasting asset is eligible for an initial allowance of 20 percent on the capitalization of the exploration and acquisition costs incurred in the year of assessment. Annual Allowance  Annual allowance are given on the depletion of the wasting asset and the plant and machinery used in the working of the source.  The amount of annual allowance shall be the balance remaining after deducting the initial allowance the fraction in which: a) The numerator represents the output from the source in question for the year and b) The denominator represents the sum of that output and the total potential future output of the source or the fraction of one-twentieth (1/20th), whichever is the greater.  SPECIALIZED BUSINESSES Contractors and Contractors Levy The Contractors Levy Act applies to all businesses (companies, sole traders, partnerships) which either are themselves subcontractors or who engage the services of subcontractors. The Act provides for a levy of two percent to be charged on the gross amount payable to any contractor or sub-contractor under a contract for services. Persons Exempt from Contractors Levy: Ministries or departments of government Statutory bodies and authorities Government-owned companies Parish councils The KSAC Persons in the construction business who have carried out work for their own use or benefit.  SPECIALIZED BUSINESSES Betting and bookmaking : Gaming Sector (Gross Profit Tax Allocation of 10%)  SPECIALIZED BUSINESSES Betting and bookmaking : Betting Sector  SPECIALIZED BUSINESSES Betting and bookmaking : Lottery Sector  SPECIALIZED BUSINESSES Agriculture Profit and Loss items : Revenue Expenditure Allowable expenses incurred by farmers are based on the criteria as for other businesses. Revenue Expenditure: Harvested Crops Where the farmer produces crops which are harvested, the expenses incurred in the planting of the crops are allowable deductions. Revenue Livestock: Trading Inventory Animals kept by a farmer are treated for tax purposes as trading stock (inventory) As trading stock the costs of the animals purchased and bred are expenses to the trading account. Livestock Raised for Their Products: Production Herd Where the animals are maintained for their products which are sold for profits. Approved Farmer Status  SPECIALIZED BUSINESSES Hotel and Tourist Accommodation Hotel or guest house computes its net profit in the normal way, makes the adjustments for taxation and computes tax at 25 percent for unregulated companies or for large unregulated companies at 30 percent. Guest Accommodation Room Tax (GART) Rooms Rate 1 to 50 US$1 51 to 100 US$2 Over 100 US$4 Questions & Answers THE END