Double Taxation Treaties (DTT) are agreements between two or more countries that aim to eliminate double taxation of income or gains arising in one territory and paid to residents of another territory. DTT provide certainty of treatment for investment and trade across borders. They also help to protect a country’s taxing right and protect against attempts to avoid or evade tax.
Jamaica has bilateral tax treaties with twelve (12) countries, namely Canada, Denmark, France, Germany, Israel, Norway, Peoples Republic of China, Spain, Sweden, Switzerland, United Kingdom and United Sates of America. Jamaica is also a member of the CARICOM multilateral tax treaty which is signed by eleven (11) jurisdictions including Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, St. Kitts & Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad & Tobago.
Below is a summary of Jamaica’s signed double taxation treaties and rates:
| Taxation Treaty Countries | Dividends Portfolio Investments (%) | Dividends Substantial Holdings (%) | Interest (%) | Royalties (%) | Management Fees (%) |
| Canada | 15 | 22.5 | 15 | 10 | 12.5 |
| Denmark | 15 | 10 | 12.5 | 10 | 10 |
| France | 15 | 10 | 10 | 10 | 10 |
| Germany | 15 | 10 | * 10/12.5 | 10 | 33 1/3 company 25 individual |
| Israel | 22.5 | 15 | 15 | 10 | 33 1/3 company 25 individual |
| Norway | 15 | 15 | 12.5 | 10 | 10 |
| Peoples Republic of China | 5 | 5 | 7.5 | 10 | 33 1/3 company 25 individual |
| Spain | 10 | 5 | 10 | 10 | 10 |
| Sweden | 22.5 | 10 | 15.5 | 10 | 10 |
| Switzerland | 15 | 10 | 10 | 10 | 10 |
| United Kingdom | 15 | 22.5 | 12.5 | 10 | 12.5 |
| United States of America | 15 | 10 | 12.5 | 10 | Taxed as business profits |
| CARICOM (Caribbean Community) | 0 | 0 | 15 | 15 | 15 |
* 10% if received by bank 12.5% in all other cases
For all other countries not listed above, individuals will pay 25% and companies pay 33 1/3% for dividends, interest, royalties and management fees.
In addition to the above, DTT often cover several other popular areas such as Permanent Establishment, Independent Personal services, Dependent Personal Services and Business Profits. Many of Jamaica’s DTT are similar in their layout but care should be taken when applying each as there may be small differences in the wording which affects the application.
BENEFITS OF DOUBLE TAXATION TREATIES
A DTT between Jamaica and another country serves to prevent income earned in the other country by a Jamaican resident from being taxed twice and vice versa. It also makes clear the taxing rights between Jamaica and the treaty partner on different types of income arising from cross-border economic activities between the two countries.
The government uses tax treaties primarily to promote capital inflow and expand foreign trade. International trade is economically good for Jamaica and territorial double taxation can be discouraging for foreign investors as well as locals wishing to invest abroad. Jamaica’s signing of various DTT over the year goes to show that the Government believes in international trade and has made tangible moves to provide a more conducive environment for cross-border trade.
In Jamaica DTT provisions override that of local law and DTT are often times more favourable than local law. DTT usually provides for lower tax rates, income being taxed only in one jurisdiction, exemption of taxes for short periods and a tax credit for taxes paid or accrued in another jurisdiction where applicable.
The Honourable Peter Phillips in announcing the 2013/14 Revenue Measures stated that every Jamaican resident who receives dividends from a Jamaican resident company is subject to tax at 15%. Based on this, a Jamaican investor would receive no benefit from a tax treaty with countries such as Norway, UK or US if they had decided to invest in these countries instead of Jamaica, since their treaty rate for Dividends Portfolio investment is 15%. However, a Jamaican resident who receives dividends from a CARICOM member country or Peoples Republic of China or Spain would enjoy treaty benefits of a lower tax rate of 0%, 5% and 10% respectively.
Jamaicans are encouraged to explore investments in countries with which Jamaica has signed DTT and enjoy the benefits that are available.
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