SEZ to get another 20 operators in free zone switch
Jamaica’s Special Economic Zone Authority, JSEZA, expects to have at least 30 per cent of free zone operators transitioned to special economic zone entities before the grandfathering period for free zones come to an end on December 31.
Director of Stakeholder Relationship Management and Communication, Richard Sewell, told the Financial Gleaner that up to June, roughly 10 per cent or seven of 68 companies operating in industrial areas that were once designated free zones moved to SEZ status.
“At the end of this month we expect to get another 20 per cent, so within the next two weeks, we expect to get majority of the applications,” Sewell said.
JSEZA will cease acceptance of applications for SEZ status by July 31. The transition is expected to take 60 working days.
To date, 10 companies have registered for SEZ status, half of which are developers. Newly registered SEZ operators, combined with the transitioning free zone operators, should bring the total SEZ entities to 30 by the end of the month.
“This is something that we have been advising persons about, but in just about everything, most people are going to wait until it’s close to the deadline before they start the process. If you do that, and certain requirements are to be met, then you are going to have a little problem there,” Sewell said.
“Fortunately, some of the major ones like Kingston Free Zone and Montego Bay Free Zone have already transitioned, so the occupants of those zones can get the tax benefit,” the director added.
The SEZ Act was passed in 2016 to replace the law that established free zones, which have been phased out to conform with international free trade rules against export subsidies.
Under the new system, operators in the zone will receive tax incentives, including corporate income tax of 12.5 per cent, down from the standard rate of 25 per cent on profit.
Additionally, SEZ entities will pay no tax on dividends or rental of property within the zone. Operators can also get a tax credit against funds spent on research and development, capped at 10 per cent of taxable income, among other incentives.
The JSEZA, however, requires that developers have minimum paid-up capital of US$1.5 million ($205 million), while the occupants of a designated SEZ must have US$25,000 ($3.1 million) of paid-up capital to qualify.
SEZ occupants are also required to invest a minimum US$50,000 in equipment, buildings and plant during year one, while small and medium-sized entities with the potential for high growth will be considered on a case-by-case basis by the JSEZA.