Sabrina N Gordon, Business Reporter

Silva

Jamaica has signed a double-taxation treaty with the government of Spain, becoming the first Caribbean English-speaking country to so engage the European nation. But more important, once ratified, it will take Jamaica off Spain's list of 'tax havens' and clear the way for Spanish investors here to pay income tax in one jurisdiction instead of two.

"Essentially, the agreement allows for Spanish businesses to elect to pay taxes either in Jamaica or Spain, and will thus facilitate companies not having to pay taxes in two jurisdictions," said Audley Shaw, minister of finance and the public service.

Spanish businesses in Jamaica straddle different sectors, but they mainly operate in the tourism market, which grants a 10-year holiday to companies that invest in hotel properties.

Since the mid-1990s, Jamaica has seen an influx of Spanish investment, aggregating close to US$2 billion and creating over 40,000 jobs directly and indirectly, according to the Spanish ambassador. Businesses in Jamaica pay 33 1/3 per cent in corporate income tax. The rate in Spain is 35 per cent.

Spain becomes the 18th jurisdiction with which Jamaica has such an agreement, officially known as the 'Convention Between the Kingdom of Spain and Jamaica for the Avoidance of Double Taxation and the Pre-vention of Fiscal Evasion with Respect to Taxes on Income'.

The treaty takes effect January 2009, following its ratification in both the Spanish and Jamaican parliaments, the parties said. It will apply to areas of business profits, management fees, dividends, royalties and interest payments. A protocol to facilitate the exchange of information - to be provided on request - and tax examination between both countries is also included.

Ambassador Jesús Silva said companies opting to pay income in the country with the lower tax rate, would be required to pay the difference between the two rates in the other jurisdiction.

Jamaica's designation as a tax haven by Spain had denied Spaniards exemptions from paying taxes at home.

"Consequently, investors were paying tax twice, which makes it more expensive to do business in Jamaica than other countries," said Silva.

Wednesday Business was unable to ascertain how much in taxes Spanish investors currently pay here.

sabrina.gordon@gleanerjm.com