Amendments to the Income Tax Act to introduce Transfer Pricing legislation have been passed by both Houses of Parliament and are set to take effect for year of assessment 2015 and subsequent years. These amendments, drafted in accordance with Organization for Economic Cooperation and Development (OECD) standards will strengthen and clarify the existing provisions under the Act relating to taxpayers engaged in transactions with related parties.
Cabinet had approved the introduction of Transfer Pricing Rules in 2011. The Bill was subsequently tabled by the Honourable Minister of Finance on the 5th of May 2015, and has benefitted from consultations with private sector groups.
As a result of the Transfer Pricing Legislation, the new requirements for the year of assessment 2015 are the following:
- All taxpayers engaging in connected party transactions will be required to complete a “Related Party Transaction Schedule” to be attached to the Income Tax Return and submitted by March 15, 2016.
- Only large taxpayers whose gross annual revenue equals or exceeds $500,000,000 transactions, to determine whether the transfer price used is in accordance with the Arm’s Length Principle.
It should be noted that, for year of assessment 2015, where a taxpayer, when filing a return, fails to certify that transactions have been carried out with connected parties or provides an incomplete certificate or return, the penalty provision applicable to these
offences will be effective for year of assessment 2016.
The legislation also provides for Advance Pricing Agreements (also called Transfer Pricing Agreements), which have been adopted as “best practice” by tax administrations worldwide.
This will allow taxpayers who are engaged in highly complex transactions or specialized industries to apply to the Commissioner General of Tax Administration Jamaica (TAJ) for an Advance Pricing Agreement before the transaction is carried out. The agreement then takes
effect at a future date agreed by the parties.
Training in Transfer Pricing for the technical and legal staff of Tax Administration Jamaica continues, with technical assistance provided by the OECD. Sensitisation sessions, which will include engagement with external stakeholders, are scheduled for January 2016.
For further information persons may call the TAJ Customer Care Centre at 1-888-Tax-Help (1-888-829-4357) or visit the website www.jamaicatax.gov.jm