As an individual operating a small business and/or earning an income from trade or rent, one of your obligations is to pay your fair share of taxes – no more, no less. Below are answers to some of the frequently asked questions from persons operating small businesses.
IF I OPERATE A SMALL BUSINESS DO I NEED TO FILE INCOME TAX RETURNS?
Yes. As an individual whether you are self-employed, a partner in a business or you are employed and earn income from other sources you should file an Income Tax Return (IT01) for last year (2009) to the Commissioner of Inland Revenue by March 15. In addition to the annual final return, you should also file a Declaration of Estimated Income & Tax Payable Return (IT07) for 2010 by March 15. You can download the Income Tax return forms online at www.jamaicatax.gov.jm or collect them at any of the twenty-nine (29) Tax Offices across the island.
In addition to paying whatever taxes are owed for last year (2009) by March 15, estimated tax calculated based on your estimated income is to be paid quarterly on March 15, June 15, September 15 and December 15.
HOW DO I KNOW IF THE INCOME FROM MY BUSINESS IS TAXABLE?
Once you operate any sort of business and you earn an income it is taxable. You may earn income from profits or earnings from business, trade, profession, vocation, rent, interest and farming. Examples of persons who should file annual income tax returns and pay the relevant tax include:
· Landlords (including residential)
· Dressmakers
· Shopkeepers/Vendors
· Part-time Workers
· Entertainers
· Photographers
· Bar operators
· Electricians
· Mechanics
· Plumbers
· Hairdressers
· Gardeners
· Farmers
· Lawyers
· Doctors
· Taxi or bus operators
· Builders/Contractors
· Artists
DO I PAY TAX ON ALL I EARN?
No. To calculate the amount of income on which you would pay tax, subtract your genuine business expenses from your gross earnings. Please note that your private and domestic expenses such as your personal utility bills, school fees and grocery bills are not allowed. The cost for your fixed assets such as freezers, computers, furniture, equipments are also not allowed. However, the law allows you to claim capital allowances at predetermined rates on fixed assets used in your business. It should be noted also that losses from your business can be set off against income received. Any loss suffered may be carried forwarded indefinitely until it is fully utilised.
IS THERE A SIMPLE WAY TO CALCULATE MY NET PROFIT?
Yes there is. If the gross income from your business is less than or equal to $3,000,000 ($3M) you may use a
Schedule 1 - Details of Trading form to guide you to calculate your net profit. This form will help you to set out all the possible income and expenses from your business. Once you put in all the figures and do your calculation you will arrive at your net profit. The form may be completed electronically and then downloaded and printed from the website
www.jamaicatax.gov.jm.
HOW DO I CALCULATE HOW MUCH TAX TO PAY?
The income tax rate for individuals is 25% and every individual resident in Jamaica is allowed an annual threshold or nil rate of tax of $270,504 for the year 2009. This means that if your net profit or earnings is less than the threshold you would not pay any tax. Please note however that you would still need to file a tax return. Pensioners and persons 65 years and over are further entitled to exemptions of $62,500 and $62,500 respectively for 2009.
For example the 2009 tax liability for a sixty-six year old shopkeeper, who is not a pensioner, is as follows:
Total Gross Income $800,000
Less business expenses $420,000
Net profit $380,000
Less age exemption $ 62,500
Statutory income $317,500
Less nil rate $270,504
Taxable income $ 46,996
Tax @ 25% $ 11,749
Additionally, in computing your projected income and tax payable for the year 2010, you should use the income tax threshold which applies to 2010 of $441,168. In respect of pensioners and persons aged 65 and over, they are further entitled to exemptions of $80,000, in each case for 2010.
WHERE SHOULD I FILE MY TAX RETURNS?
You may file your income tax returns at the Tax Office nearest to you. It is recommended that you do not wait until the last day to submit your tax return as the tax offices are usually very crowded at this time and it would therefore take a longer time for you to be processed. Alternately, if your are just submitting your return and/or you are paying by cheque, you may use the electronic drop boxes available at the King Street, Cross Roads, Constant Spring, Mandeville, Montego Bay or Spanish Town Tax Offices
WHERE CAN I GET ADDITIONAL INFORMATION?
For additional information you may call the Tax Administration Customer Care Centre at 1-888-TAX-HELP (1-888-829-4357) or your local Tax Office for details of a free Special Taxpayer Service Programme currently being hosted by the Tax Administration at several locations across the island, to help persons to prepare their income tax returns.
