By: Kmar Henry
CEO │ BIZcare Consultation & Accounting Firm Limited
Date: January 6, 2022
Let’s remove the fear for a while and let’s think about the ‘know how’ we need to ensure that we won’t be nervous if that tax compliance officer happens to pull up at our business locations. It is a fact that our Government has NOW implemented rather harsh penalties due to the high number of taxpayers and business owners who have not been complying with the necessary tax measures. Hence, filing late will now attract a late fee of $5,000.00 per month. So, let’s do a rough estimate in our heads; ‘let’s say that we are one year late, right, that would actually amount to $5000.00 x 12 months = $60,000.00?’ Yes! You are very much correct, so let us look at the tax measures that we must comply with before we even think about starting a business.
1. SO4/ITO2/ITO3 Filing: Each is dependent on the type of business that you choose to start, so let us look at each separately:
a. SO4: This is required or used by persons who start a sole trader otherwise called a
Trade As (T/A) which is accompanied by a Business Name. It is important to note that
with this business type, as a taxpayer, you still benefit from the Income Tax
The threshold is now at $1,500,096.00 effective April 1, 2018.
b. ITO2: This is used by persons who choose to start a Limited Liability Company.
With this type as a company, you are not entitled to receive the Tax Threshold
benefit, however, there is a new Income Tax Credit of $375,000.00 since 2021 for MSMEs whose annual revenue does not exceed JMD 500M. It is imperative to also note that shareholders are required to file their annual taxes individually.
c. ITO3: This is required by entities who choose to operate as a partnership, which is one of the most preferential types of business at first instance. It should be noted that both the aspect of profit being shared and the Tax Threshold are considered. Hence, only profits are declared and then taxes are filed individually for each partner based on how profit is shared.
It is also important to note that all filing methods require the filing of an estimate of the preceding year based on what was filed for the prior year.
2. GCT Filing: Perhaps one of the most misunderstood taxes among the Small Business community. Let me first establish that only persons or small businesses earning revenues over $10,000,000.00 are required to file, collect or turn over the ‘GCT portion back to the government.’ Thus, if you are below you are NOT required to file in this respect, Except for Car Dealerships who are required to register regardless of the threshold. However, for those who are over this threshold you are required to file a 4A form MONTHLY; of which you are required to turn over the portion left when you subtract your sales from your purchases. Remember the GCT portion is calculated after you have attached your mark upon your ‘UNIT COST.’ So, you are only turning over that amount and not your ‘PROFIT.’ Furthermore, it is important to remember that you will certainly end up with a credit amount in some months based on the purchasing nature of your business.
3. SO1 & SO2 Filing: In the real world, most businesses are avoiding this tax measure by going the contract route within the aspect of employment. Thus, employees are obligated to pay their own taxes for the period employed. And although this is not legal, employers are able to get away with this because of the desperate need for jobs. However, if you are taking into consideration the welfare of your employees, you are required to collect, file, and pay over their taxes monthly via the use of an SO1 Form based on their wages which should be over the minimum wage of $7,000.00 weekly or $28,000.00 monthly. You are then required to file over the total sum based on their salary throughout the year via the usage of an SO2 Form. You can visit the JamaicaTax.com website for more information on the rate of each tax portion based on employee and employer amounts.
It is important to note that there are other obligations that include your trade & business license, business registration, and property tax payments if you are operating at your own building. It is encouraged to know and understand the five (5) named tax measures as these will prove pivotal towards the long-term survival and running of your Small Business. It is extremely important for us as Small Business owners to stay informed and knowledgeable of changes when they are implemented by our government. Thus, a good relationship with your compliance officer or tax accountant is essential.
If you need help or further information, please feel free to contact us at 1 (876) 902-7259 | 545-6928 or email us at BIZcareConsultationAcct@Gmail.com to arrange your consultation session. Do remember at BIZcare “Your Business is our Priority”. We offer the services of:
- Business Registration
- Tax Filing
- GCT Filing
- Payroll Services
- Consultation Services
- TCC Services
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Written by: Kmar Henry [ CEO | BIZcare Consultation & Accounting Firm Limited ]
Edited by: Anothonio James [ CEO | I Am Skilled ] and
Sheryl Bailey [Director | BIZcare Consultation & Accounting Firm Limited ]