Special Economic Zones

 It's no suprise that the world is  global village and with this global village mindset, this provides the opportunity for the growth of investments both domestic and international to grow within a country. One of the ways in which countries such as Jamaica capitalises on this opportunity is by having special economic zones.

What are Special Economic Zones (SEZs)?

Special economic zones commonly called (SEZs) are a gamut of specially geographically demarcated areas within a country's region .  These zones offer simple special economic regulations and efficient guidelines along with benefits  for entities which would operate within the zone.

The intention behind this is that there would be both greater domestic  and foreign investments which as a direct result would be increased economic  stimulus to the local economy  (eg: logistics)and employment.

Statute

The relevant legislation is the Special Economic Zones Act, 2016,which  came into force on August 1, 2016 and therefore effectively repeals the Jamaica Export Free Zones Act.

Categories of persons entitled to use SEZs

      Developers- A company limited by shares incorporated under the Companies Act of Jamaica and established by a sponsor (ie an investor) for the purposes of entering into a master concession/licence agreement;

      Occupants- A person who conducts business in the SEZ under a sub-concession agreement with the developer

      NB: Zone users are persons  other than the categories listed above to perform activities  within the zone once they are authorized by the Authority

Advantages

      The establishment of Special Economic Zones Authority referred to as “The Authority” throughout the Act- This Authority will enhance efficiency and competiveness of the SEZs  given that some of their functions include:

i)                    Handling of development applications

ii)                  Management and operation of a business and acceleration centre, which shall assist with the communication and coordination of regulatory activities with Government entities on behalf of the developers and occupants of the SEZS;

iii)                The promotion of and marketing of the SEZs and;

iv)                The raising of capital to execute its functions under the Act.

      Entities within the SEZs are able to freely sell goods on the local market  and export goods outside of the SEZs;

      Developers have more free will in that they can now establish SEZs privately through concession or licence agreements with the Authority. NB: They must have at least US $1.5 million in capital as a prerequisite to obtaining a concession or licence agreement with the Authority A developer that is not an MSME will not have to meet this requiremenet so long as the Authority is satisfied that sufficient development potential and is likely to meet the capital requirements with four (4) years.

The tax benefits are:

The tax benefits are conferred upon the Authority as well as developers and occupants of the SEZs

      Stamp Duty- 50%  stamp duty relief payable upon purchase,lease,or other acquisition of land used by a developer of an SEZ;

      General Consumption Tax-No General Consumption tax on electricity/phone services provided to entities within the SEZs;

      Income tax- Reduction in 12. 5 per cent on income tax.

Prohibited activities that are in the Special Economic Zone are see section 41 (1)_:

       Tourism services

      Financial services

      Construction services

      Health services including research and development

      Retail trade

      Telecommunications services

      Public utilities

      Real Estate

      Catering services

      Extractive industries such as mining, quarrying or drilling

NB: The Authority also has the purview to allow for the establishment of an SEZ in which only specific economic activities such as maritime or aviation may take place

Conclusion

SEZs as aforementioned are to provide stimulus to the Jamaican economy as it provides lucrative incentives for both foreign and domestic investments as outlined and of course provides an opportunity for more dynanism and growth in previously untouched areas.

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