One of the recent changes to the tax system was the introduction of a Mini-mum Business Tax (MBT). This was announced in a previous budget but has now been implemented. It forms part of the Government's initiative to widen the tax base.
The MBT, as the name suggests, is a minimum amount of $60,000 to be paid by specified taxpayers who operate a business for year of assessment 2014 and onwards. The MBT does not replace any other tax obligations that business owners would normally have, such as the quarterly estimated income tax payment.
It will, however, be treated as a credit against any income tax liability for the year of assessment.
The MBT applies to a company or body corporate, other than an entity that is a charitable organisation registered under the Charities Act. It applies specifically to businesses incorporated or registered under the Companies Act, Building Societies Act, Friendly Societies Act or the Industrial and Provident Societies Act.
In the case of an individual, it applies to any person who operates a trade, profession, vocation or business that has gross revenue of $3 million and over.
The Cash Flow Projection of the business should assist in the determination of revenue in absence of a prior year financial statement.
DUE DATE AND PENALTIES
The payment is to be made in two instalments of $30,000 by June 15 and $30,000 by September 15. Even though the MBT became effective on April 1, there is no pro-rating and the full $60,000 must be paid in calendar year 2014. It can be made at any tax office, using a payment advice.
It cannot be paid through the Jamaica Tax Portal at this time as the online payment option is not yet available.
If the amounts are not paid on time, penalty will accrue on all unpaid amounts at the rate of 1.5 per cent of the minimum business tax per month or any balance due until the liability is cleared.
The MBT is regarded as being outstanding if it is unpaid as at the first day of the calendar month following the due date for payment.
Where penalties are levied on an individual's account and the Commissioner General determines that his/her income tax liability is equal to or less than the minimum business tax, the MBT liability of the individual will be discharged along with all penalties.
REFUNDS AND CREDITS
The treatment of refunds and credits are based on whether persons operate as a company or an individual. For both companies and individuals, the MBT can be used as a credit against income tax liability for that year of assessment. Likewise, neither a company nor an individual can use excess MBT to offset MBT for any subsequent year of assessment.
However, in respect of refunds the treatment is different. A company cannot claim a refund in excess of income tax liability, whereas an individual can claim a refund in excess of income tax liability. An individual can also carry forward the MBT amount in excess of income tax liability to be used against income tax payable in any subsequent year of assessment, while a company cannot.