The cries of MSMEs are being heard.
Dr. Nigel Clarke presented another economic stimulus package that has some direct benefits for small business owners in Jamaica.
It’s great news if you understand how to apply it.
The most memorable aspect of his budget presentation was the 1.5 percent reduction in G.C.T. A reduction from 16.5 percent to 15 percent means that the government is putting $14 million back into the economy to stimulate economic activity.
However, this isn’t the only benefit for a small business in Jamaica.
In an interview with Jamaica’s finance influencer, Kalilah Reynolds, Dr. Clarke mentioned that there are between 8,000 to 10,000 registered small businesses in Jamaica. These are the businesses that will benefit from a $375,000 tax give back when they file their income taxes each year.
Watch this video to learn more about how the giveback works.
Here’s a summary of how this $375,000 tax give back works.
- MSMEs are taxed on their profits.
- Any MSME that earns less than $375,000 in profits won’t pay income tax.
- Any MSME that earns more than $375,000 in profits will only pay income tax on the amount in excess of $375,000.
Please note that you are still required to pay NIS, NHT and Education Tax on any income your business earns. It’s a mandatory part of the tax filing process. Read this article to learn more about how you can manage your business’ finances so that you’re ready when tax season comes around.
Here are some tips for effectively using this $375,000 tax giveback.
Register Your Business
Small business owners in Jamaica tend not to see the benefit of registering their business because they want to avoid paying taxes. I discuss the business registration process and the benefits of paying taxes in The Business Playbook:A Guide for Jamaican Startups. This book also guides you through the steps of creating a successful business in Jamaica and helps you determine whether your business is even ready to be registered.
The only way for your business to access better opportunities and expand is for it to be legal. You are essentially operating illegally if your business is not registered at the Companies Office of Jamaica and the Tax Administration of Jamaica.
The process is simple and paying taxes helps make Jamaica a better place. The government has lessened the amount of tax you need to pay. However, it’s your responsibility to do the ground work and use this working capital to help your business grow.
You won’t benefit from the $375,000 cash back if your business isn’t legal.
That $375,000 would be ideal for pursuing new business opportunities. Debt is inevitable for some small businesses since some business opportunities require a large injection of capital. However, avoid taking on debt as much as possible without using all the cash reserves of your business.
Sure, interest payments act as a tax shield for small businesses and corporations that exceed the minimum tax threshold. However, a high level of debt can result in missed investment opportunities (few investors will partner with a company that has too much debt) and can be a sign that you’re not managing the business’ finances properly.
You could use the $375,000 to invest in business opportunities without taking on debt if possible. Another option is to use the $375,000 to pay off existing debt and give your business a fresh start. Look carefully at your business’ financials and determine which option is best.
Develop an Effective Website
A website is necessary if you want to compete in this global environment. Only a few Jamaican small businesses websites and few of those who do have invested enough time and money into making them effective. Every business needs a website.
A website helps your business by:
- helping potential customers find your business
- establishing your brand as a thought-leader in the industry through blogging
- helping your business transition into ecommerce
A portion of that $375,000 can be used to invest in the best possible website for your brand. Contact us if you want to hire a tam that can get your website off the ground.
A $375,000 Gift for Small Businesses in Jamaica
The government is trying its best from a fiscal standpoint to create a better environment for small businesses in Jamaica. You have to meet them halfway. Register your business. That’s the only way you’ll benefit from this $375,000 gift.