THE introduction of the special economic zone (“SEZ”) regime in Jamaica 6 years ago was geared towards the positioning of the country as a viable participant in global trade by creating a globally competitive environment in which businesses can thrive. With over 180 entities operating within 9 industries in over 100 SEZs across 8 parishes, it does appear that Jamaica has benefited, and continues to benefit from, job creation, increased productivity, and economic growth stimulated by the SEZ regime.
With more than 7,000 SEZs and over 100 million employees in over 145 countries worldwide, hundreds of foreign and local investors have flocked to Montego Bay, along with technocrats and government officials, from June 13th to 17th for the World Free Zones Organization’s 8th Annual International Conference & Exhibition (AICE 2022), the world’s must-attend event for free zones, SEZs and associated entities, hosted by the Jamaica Special Economic Zone Authority (JSEZA).
Jamaica is now on display in Montego Bay as an ideal location for SEZ investments, and JSEZA has been working to expand and diversify Jamaica’s SEZ investment portfolio in a bid to attract developers wishing to establish modern, large-scale zones. Dubbed the VIP Industries, JSEZA has revealed that the key industries most suited to take advantage of Jamaica’s strategic position close to the world’s largest single market and to capitalise on its comparative advantages include: food manufacturing and agrotechnology; logistics and supply chain management; pharmaceutical; global services sector (ICT and BPO); creative industries and new digital media; automotive; biotechnology; electronics; digital/ICT equipment and services; beauty care; and medical devices. A prospective investor may also wish to explore the possibility of investing in one of the regime’s permitted industries not listed among the VIPs.
Presently, the Special Economic Zones Act, 2016 (the “SEZ Act”) affords developers of SEZs and occupants operating within those SEZs, numerous fiscal incentives once those companies have obtained regulatory approval to carry out their authorised SEZ activities as occupants or a developers.
A local or foreign investor may seek to explore the possibility of becoming a developer of an SEZ in Jamaica. A developer is a company, limited by shares, that is incorporated under Jamaica’s Companies Act and is established by a sponsor (investor/s) for the purpose of entering into a master-concession or a licence-agreement with JSEZA in relation to the establishment of an SEZ.
A master-concession is a concession agreement concluded between JSEZA and the developer of an SEZ established, or intended to be established, on land that is vested in JSEZA as the registered proprietor or head lessee of the land. The proposed Caymanas Special Economic Zone, for example, is a project within the Government of Jamaica’s Global Logistics Initiative in which the lands are likely to be vested under the control of JSEZA as registered proprietor or head lessee. In order to position Jamaica as a global leader in cargo trans-shipment and logistics services, technology and agro-technology services, JSEZA is likely to enter into master-concessions with local and foreign investors as part of proposed public-private partnerships currently under review.
On the other hand, a licence-agreement is a concession agreement concluded between JSEZA and the developer of an SEZ established, or intended to be established, on land that is not vested in JSEZA as the registered proprietor or head lessee of the land. JSEZA also has the discretion to allow the establishment of specialised SEZs, which are SEZs limited to specific economic activities such as maritime or aviation-related SEZs and which may include dry docks, bunkering facilities, aircraft maintenance and repair, tank farms, among others.
A prospective investor may also consider carrying on business in an SEZ as an occupant. An occupant is a person, other than the developer of an SEZ or a ‘zone user’, who conducts authorised business activities in an SEZ pursuant to the terms and conditions set out in a sub-concession agreement it has entered into with the developer of that SEZ, with the prior approval of JSEZA. Finally, one may choose to invest as a zone user. A zone user is a person who receives authorisation from JSEZA permitting that person to carry out or operate, as the case may be, any activity, service or facility in an SEZ.
An SEZ can afford an investor who is a developer or an occupant (but not a zone user) certain critical fiscal incentives. For example, the SEZ benefits result in an income tax rate of 12.5 per cent, which is half the normal rate and can be reduced to 7.5 per cent with certain tax credits. In addition, the SEZ benefits result in exemption from the payment of income tax on profits derived from rentals of property in a SEZ, capital allowance, promotional and employment tax credits, relief from transfer tax, stamp duty reduction, no customs duty or general consumption tax (GCT) on the import of equipment, GCT relief on certain goods and services entering an SEZ, and refund of customs duties upon the exportation of goods from Jamaica.
The regulatory approval process involves the submission of a business plan, that includes a financial analysis, to JSEZA. Typically, in considering an application for approval, among other things, JSEZA wishes to be satisfied that the applicant will be conducting activities from which Jamaica will be earning some kind of tangible benefit, for example through increased provision of jobs, inflows of foreign exchange, where applicable, and achieving sustainable development goals. Consideration therefore needs to be given to how a prospective investor can demonstrate, through a business plan, that SEZ approval should be granted so the investor can go forward with the implementation of the investment plan.
Having experienced business and legal advisors on an investor’s team is imperative, not just at the execution stage of an investment plan in Jamaica but from conceptualisation of an SEZ plan, right through to obtaining the desired regulatory approval to establish an SEZ or commence business operations within an existing SEZ in Jamaica.
Jezeel Martin is an associate at Myers, Fletcher and Gordon, and is a member of the firm’s Commercial Department and SEZ Practice Group. He may be contacted at jezeel.martin@mfg.com.jm or through the firm’s website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.