The first of a two part move by Finance and Public Service Minister, Hon. Audley Shaw to increase Jamaica’s income tax threshold to $1.5 million came into effect on July 1st, 2016.
On July 1, the threshold increased from $592,800 to $1,000,272.00. All pensioners, P.A.Y.E. self-employed and other individuals earning up to this amount will benefit from the increase. The second phase will increase the personal income tax threshold to $1,500,096 on April 1st, 2017. Any amount earned exceeding this figure is subjected to be taxed at 25%.
For example, if an individual earns a total of $1,280,000.00 from January to December, approximately $1,000,272.00 would be tax exempt. The remaining $279,728 would be taxed at 25%.
In addition to the tax break, an additional tax rate is to be applied to persons who earn over $6,000,000.00 annually, which increased from 25% to 30% on July 1, 2016. According to the Jamaica Information Service, approximately 12,000 persons representing 1% of all individuals earning an income would fall in this category.
Income tax is calculated on an individual’s statutory income aggregated on a month to month basis based on the income tax employment regulations. Aggregate income means the total salary and benefits paid from January through to December of each year.
Commencing in July 2016, a 30% tax rate will be applicable to the aggregate income earned in excess of $6 million. For example, if $500,000 is earned in January, $100,000 in February, $2,000,000 in March, $3,000,000 in April, $500,000 in May, and $1,000,000 in June, and $100,000 in July, the aggregate income in July is $7,200,000. The 30% would therefore be applicable to the $1,200,000 and on any additional income earned for the calendar year.