On 11 March 2025, Jamaica's Minister of Finance delivered the annual budget speech, announcing proposals for accelerated capital allowances on specific capital expenditures incurred during 2025 and 2026. Other proposals included a reduction in the dividend withholding tax (WHT) rate for nonresidents, alongside various measures affecting personal and consumption taxation.

Accelerated capital allowances for 2025 and 2026 capital expenditures

The budget proposed temporary amendments to the Income Tax Act to facilitate accelerated capital allowances on certain assets. Significant rate increases are proposed for buildings (both industrial and non-industrial), automated data processing equipment, and other plant equipment and machinery. For example:

• Industrial buildings (primarily constructed of concrete): The initial allowance would increase from 20% to a Year 1 allowance of 30% and Year 2 allowance of 25%. Annual allowances increase from 4% to 5.5%.
• Non-industrial buildings (primarily constructed of concrete): The initial allowance would increase from zero to a Year 1 allowance of 12% and Year 2 allowance of 8%. Annual allowances increase from 4% to 5%.
• Machinery used in production or manufacturing of primary products: The initial allowance would increase from 25% to 40% and annual allowances increase from 12.5% to 25%.
• Automatic data processing equipment. The initial allowance would increase from 25% to 40% and annual allowances increase from 20% to 33.33%

It is proposed that these accelerated allowances are available for investments made between 1 January 2025 and 31 December 2026.

Dividend WHT rate reduced for nonresidents

To align the tax rates for Jamaican residents and nonresident shareholders, the budget proposes reducing the tax rate on ordinary dividend income for nonresidents to 15%. Currently, the rates are 33% for nonresidents other than individuals and 25% for nonresident individuals, absent any treaty benefits. The effective date for this measure has yet to be announced.

Other budget measures

The budget also includes several other tax measures relevant to individual taxpayers and small businesses:

• A series of three annual increases in the Personal Income Tax Threshold, raising it to 1,799,376 Jamaican dollars (J$) from April 2025 and to J$2,003,496 by 2028
• Adjustments to the General Consumption Tax (GCT) regime for residential electricity consumption
• A 50% increase in the GCT registration threshold, exempting from GCT registration businesses with annual sales below J$15m

Implications

Businesses planning significant capital investments in Jamaica should closely monitor the legislative progress required to implement the accelerated capital allowances and may consider expediting their expenditures.

Furthermore, the reduction in dividend WHT rates could simplify investment and structuring decisions for businesses looking to invest in Jamaica.