The Double Taxation Relief (Taxes on Income) (Jamaica) Order 1973

EXPLANATORY NOTE

The Agreement with Jamaica scheduled to this Order replaces the Agreement signed on 2nd April 1965 as amended by the Agreement signed on 9th May 1969.

Many of the provisions of the earlier Agreement have been retained with little or no amendment. The most important are those relating to the taxation of shipping and air transport profits, pensions, business profits and earnings from employment, the exchange of information between the taxation authorities of the two countries and the exclusion from the Agreement of certain Jamaican companies which enjoy special privileges under Jamaican law. Where income continues to be taxable in both countries credit will, as in the earlier Agreement, be given by the country of the taxpayer's residence for the tax payable in the country of origin of the income, including United Kingdom credit for tax spared under specified provisions of the Jamaican law.

The most significant changes are in the treatment provided for dividends, interest, royalties and management fees.

The treatment of dividends has been altered as a consequence of the introduction of the new United Kingdom corporation tax system and of changes in the Jamaican tax system. The Agreement provides that where a United Kingdom company pays a dividend to a resident of Jamaica other than a company which controls 10 per cent or more of the voting power in the paying company, the recipient is, subject to certain conditions, to receive the tax credit to which an individual resident in the United Kingdom and in receipt of such a dividend would be entitled, less income tax at a rate not exceeding 15 per cent on the aggregate of the dividend and the tax credit. Dividends paid by Jamaican companies to residents of the United Kingdom will be subject to tax in Jamaica at rates not exceeding 22½ per cent, if the beneficial owner is a United Kingdom company which controls at least 10 per cent of the voting power in the company paying the dividends and 15 per cent in all other cases.

While the maximum rate of tax to be imposed by the country of source upon interest paid to a resident of the other country is to remain in general at 12½ per cent, interest paid to a resident of the United Kingdom in respect of loans made, guaranteed or insured by the United Kingdom Export Credits Guarantee Department is to be exempt from tax in Jamaica.

Royalties and management fees are to be subject to tax in the country of source at rates not exceeding 10 per cent and 12½ per cent respectively. The recipient of management fees is, however, to have the right to elect to have the tax in the country of source calculated as if they were industrial or commercial profits attributable to a permanent establishment.

Other changes include restrictions (which at present only affect United Kingdom life assurance companies) in the scope of the provisions safeguarding residents and enterprises of one country against discriminatory taxation in the other country, alterations in the rules for taxing professional earnings and more detailed provisions about visiting teachers and students. Capital gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer's residence unless they arise from the disposal of assets of a permanent establishment which the taxpayer has in the other country.

The Agreement is in general to take effect in the United Kingdom for 1973/74 and subsequent years as respects income tax and capital gains tax and as respects corporation tax for the financial year 1973/74 and subsequent years.