Jamaica Explains New Transfer Pricing Rules
Jamaica has released information explaining its new transfer pricing regime, with transfer pricing documentation due on March 15, 2016.
According to the Government, 2015 amendments to the Income Tax Act were intended to remove any subjectivity in the administration of transfer pricing rules. The Government said: “Taxpayers have always had the obligation to account for connected party transactions on an arm’s length basis. However the initial burden was placed on the Commissioner General to determine whether or not the transactions were in accordance with the Arm’s Length Principle.”
“The 2015 amendments to the Income Tax Act now provides for the taxpayer in declaring his business activities for the year to inform the Commissioner General of the bases used to arrive at the declared transfer prices. This is in keeping with the self-assessment system where the taxpayer would be privy to all the terms and conditions governing their business transactions. Cabinet had approved the introduction of Transfer Pricing Rules in 2011. The Bill was subsequently tabled by the Minister of Finance on the May 5, 2015, and was debated and passed in November, incorporating suggested amendments by external stakeholders. Effective year of assessment 2015, all taxpayers engaging in connected party transactions will be required to complete a Related Party Transaction Schedule (Schedule 8) to be attached to the Income Tax Return and submitted by March 15, 2016.”
Only large taxpayers whose gross annual revenue equals or exceeds JMD500m (USD416,500) are required to maintain transfer pricing documentation at the time of their transactions, to determine whether the transfer price used is in accordance with the Arm’s Length Principle. No penalties will be applied for year of assessment 2015, for failure to report transactions with related parties, or for the failure to provide a complete return or schedule. However penalties will be imposed for year of assessment 2016 and beyond.
The Government said large taxpayers with turnover of JMD500m or more with connected party transactions are therefore encouraged to engage the Technical Specialist Unit and the Large Taxpayer Office in determining the most appropriate methodology to be applied in a given transaction.
Taxpayers who are engaged in highly complex transactions or specialized industries may approach the Commissioner General of Tax Administration Jamaica (TAJ) with a view to negotiate an Advance Pricing Agreement. The negotiating parties are to determine the commencement of the agreement, which will not be retroactive.
Tax Administration Jamaica and Revenue Appeals Division staff has undergone extensive training in Transfer Pricing Rules, this is expected to continue in January 2016 along with the sensitization of external stakeholders. Technical assistance is being provided by the Organization for Economic Cooperation and Development (OECD).
