WHY REPEALING THE RESIDENT TAX IS A GOOD IDEA
Jamaica is a beautiful island and one of the most attractive vacation and retirement destinations in the Caribbean and worldwide. In 2019, it was ranked “#14” by Trip Advisor on the Trip Advisor Travelers’ Choice Awards’ “World’s Best Destinations” list. Many real estate investors avoid buying a property in Jamaica because of their tax laws, specifically the tax residence law. This law requires real estate owners to pay taxes if they or their owners visit Jamaica at any time during the year, even if it is just for one day. Let’s throw more light on the resident tax so you can understand this law better. Residents are considered to be; individuals owning homes on the territory and occupy them for a total of 6 months within a fiscal year, or spouses owning a house which they occupy no matter how short their stay. This presents a huge turn-off, especially for buyers in search of retirement or vacation properties. Scary right? However, Jamaica is still one of the preferable destinations for those looking to invest in real estate. Regardless of this tax, there are a host of reasons why you should buy property in Jamaica. Read more about these advantages in the succeeding paragraphs.
Increase in Demand for Properties Will Spur Economic Growth
Since 2019, mortgage interest rates have hit an all-time low with banks extending loan limits, thus encouraging investment. This has enabled an increase in real estate investment by a proportion of foreigners and Jamaican diaspora members. At the same time, the demand for commercial properties is also expected to rise quickly. However, most foreigners shy away from investing because of Jamaica’s tax laws. The current environment is depicted by developers who have begun land-banking and applying for “change of use” to commercial purposes, as they anticipate future market shifts. This high demand for properties presents an excellent opportunity for the country’s economic growth. Not only will the value created by an increase in real estate activity affect the purchase of goods and services related to real estate businesses. It will also create a new source of government revenue through transactional costs related to the buying and selling of property, all of which is stifled by the existing resident tax.
It Will Boost Jamaica’s Tourism Industry
A continuously growing tourism sector highly powers Jamaica’s realty market. Post Covid-19, the island recorded a record-breaking total of 4.32 million visitors. A considerable incentive for investors looking to invest in hospitality, rental properties, and vacation homes. Despite the wariness caused by the resident tax, Jamaica records high gross rental yields standing between 9% to 13%. This presents an enormous potential boost to the country’s economic growth. Now picture a scenario in which taxes such as the resident tax are repealed. The figures will rise over the charts. That’s not all!
Growth in the real estate market signifies an increase in state fiscal returns through property transfer related tax payments (stamp duty, transfer tax, etc.). The presence of more real estate developers implies the creation of more jobs.
Creation of a More Stable Jamaican Economy
Jamaica recently completed the International Monetary Fund Programme and has been on a continuous growth path on a macroeconomic level, thereby creating an attractive atmosphere for more foreign and diaspora investment and many investors. Investment in the economy will further create a more stable Jamaican economy. However, there is one major hindrance, Jamaica’s tax laws, with emphasis on the resident law. Small steps such as reducing some property-related taxes such as the stamp duty and property transfer tax are a great start even though more measures need to be taken to propel the country’s economy.
From the above paragraphs, it is safe to say that Jamaica’s tax laws are causing more harm than good to its economy. Real estate investment, specifically from the diaspora, is a great way to boost any economy. It boosts cash inflow, creates jobs, serves as a source of government revenue, improves the business milieu; the advantages are numerous. The government should strive to create a better investment environment. Relaxing the tax law or completely repealing taxes such as the “resident tax” is a great place to start.
References
http://www.postproperties.co.zw/media/blog/real-estate%E2%80%99s-contribution-economic-growth
https://www.globalpropertyguide.com/Caribbean/Jamaica/Price-History
https://www.loopjamaica.com/content/5-reasons-consider-purchasing-property-jamaica
