Jamaica’s transfer pricing rules align with the OECD Transfer Pricing Guidelines (OECD Guidelines) and currently, are incorporated within the Income Tax Act. Further guidance is provided through two Practice Notes, respectively 02/2017 and 01/2018.
Arm’s Length Principle
Under the Jamaica arm’s length principle, all income taxpayers who make cross-border or domestic transactions with connected persons must agree to financial terms and conditions in the same manner as they would with unrelated parties, in comparable situations.
Related Party Definition
In Jamaica, related parties—referred to as “connected persons”—include individuals or companies that work with someone to control a company, follow their instructions to do so or are companies that are directly or jointly controlled by that person or by others connected to them. This also includes companies under common control. Additionally, if someone in Jamaica does business with a person in a low- or no-tax country, they are presumed to be connected unless they can prove otherwise.
Transfer Pricing Methods
The methods that can be used to determine the arm’s length price in Jamaica are:
- Comparable Uncontrolled Price Method
- Resale Price Method
- Cost Plus Method
- Transactional Net Margin Method
- Profit Split Method
In Jamaica, the transfer pricing methods are in alignment with the OECD Guidelines, and it does not provide a hierarchy among them. Instead, the selection of the method is based on the “most appropriate” principle. Also, the law allows for the usage of another method, if the taxpayer proves that none of the above can reasonably determine the arm’s length principle.
Comparability Analysis
An important part of the transfer pricing compliance is the comparability analysis. Jamaica follows the OECD Guidelines and applies the comparability analysis outlined in Chapter III. The law emphasizes comparing connected transactions with independent ones to determine if prices or conditions are aligned with market standards. Jamaica prefers the use of domestic comparables over foreign ones due to limited access to international databases and the need for fewer adjustments. Comparability adjustments are permitted when necessary to improve reliability, and the use of arm’s length ranges, such as the interquartile range, is allowed. However, secret comparables are not permitted under Jamaican law.
Documentation Requirements
In Jamaica, taxpayers that take part in transactions with connected persons must declare each transaction in their annual tax return and complete a “Declaration of Connected Person Transactions”. This obligation is entitled to companies that have an annual gross income of Jamaican Dollar (JMD) 500 million or more are required to prepare and keep contemporaneous transfer pricing documentation that aligns with the arm’s length principle.
This documentation must include details such as the business structure, transaction terms, selected transfer pricing method, comparability, economic analysis, and any relevant APAs. It must be ready by the tax return filing deadline, in English language, and submitted within 30 working days upon request by the Commissioner. Additionally, companies with an approved APA must file an annual compliance notice to confirm adherence to the agreement’s terms.
Advance Pricing Agreements (APA) and Mutual Agreement Program (MAP)
Advance Pricing Agreements (APA). In Jamaica, taxpayers may apply for an Advance Pricing Agreement with the tax authority, where they negotiate an agreement that sets the criteria—such as the transfer pricing method, comparables, and key assumptions—for determining the arm’s length consideration of specific connected transactions over a set period, up to five years. APAs can be unilateral, bilateral, or multilateral, depending on the involvement of other countries with tax treaties. Applications must be submitted in writing and include business and transaction details, the proposed scope, method, assumptions, and any relevant supporting information. While there is no fee for unilateral APAs, fees apply for bilateral (USD 10,000) and multilateral (USD 15,000) applications.
Mutual Agreement Program (MAP) is available under its tax treaties to resolve transfer pricing and other tax disputes involving double taxation. The competent authority is the Commissioner General of Tax Administration Jamaica, and requests must be submitted in writing. While Jamaica allows corresponding and adjustments, arbitration is not currently available under its MAP framework.
Penalties
Taxpayers in Jamaica, who do not certify a connected transaction or provide incorrect or inadequate information negligently or fraudulently can be fined as much as Jamaican Dollar (JMD) 2 million, or imprisoned for a maximum of 12 months upon summary conviction. Furthermore, in the case of a failure to send the APA annual compliance notice, the APA may be canceled.
Taxation at a Glance
The official name of the Jamaican tax authority is “Tax Administration Jamaica” and it is responsible for the administration, enforcement, and collection of taxes. The official currency is the Jamaican Dollar.
The table below provides a summary of the main taxation rates related to businesses:
Tax Type | Tax Rate |
Corporate Tax | 25%, 33.33% |
VAT | 15% |
Withholding tax on dividends to non-residents | 33.33% |
Withholding tax on interest to non-residents | 33.33% |
Withholding tax on royalties to non-residents | 33.33% |
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