Foreign Sales Corporation

Link to law: http://www.moj.gov.jm/laws/foreign-sales-corporation

FOREIGN SALES CORPORATION 1

THE FOREIGN SALES CORPORATION ACT

ARRANGEMENT OF SE(JTI0NS

1. Short title.
2. Interpretation.
3. Power of Minister to grant ce-te of designation to foreign

sales corporation

4. Termination of status a8 designated corporation.
5. Relief from income tax.
6. Relief from income tax of director or employees of designated

corporation.

7. Exemption from certain statutory contributions.
8. Dividends to non-resident shareholders in designated corpora-

tion.

9. Transactions with persons resident in Jamaica.
10. [Deleted vide Act I1 of 1992, S. 2.1
11. Free entry of machinery and equipment.
12. Restrictions upon the disposal of goods imported or purchased

free of customs and similar duties.

13. F a
14. Exemption from income tar of investment in foreign currency.
IS. Regulations.

sc€imms

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FOREIGN SALES CORPORATION 3

Act
20 of w84

THE FORETGN SALES CORPORATION ACT

1. This Act may be cited as the Foreign Sales Corpora- short tide.
tion Act.

2. In this Act, unless the context otherwise requires- Interpreta.
tion. “designated corporation” means a foreign sales cor-

poration in relation to which a certificate of de-
signation has been granted under section 3 and
remains in force;

“domestic operations” in relation to a designated cor-
poration means-
(a) the acquisition or rental of accommodation

to be occupied and used by a designated cor-
poration for the purposes of its business or
to be used for the purpose of providing living
accommodation for employees or officers of
the corporation;

(b) the maintenance or disposal of such accom-
modation as aforesaid;

(c) the provision of staff for the corporation;
(d) the provision of equipment and services for

use in such accommodation or by such staff
as aforesaid for the purposes of the business
of the corporation;

(e) the provision of technical and professional ad-
vice and services (including advice and ser-

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4 FOREIGN SALES CORPORATION

vices as a director of the corporation) for the
purposes of the business of the corporation;

(f, such other operations as may be prescribed
by the Minister by order;

“foreign sales corporation” means any corporation
which-

( ( I ) is incorporated or registered under the Com-
panies Acg

(5) is, pursuant to the provisions of the relevant
legislation in a scheduled State, qualified to
be regarded as a foreign sales corporation in
that State; and

( c ) has elected, or satisfied the Minister that it
proposes to elect within a period indicated by
the corporation to the Minister, to be so re-
garded in that State;

‘‘foreign trade transaction” means, subject to the pro-
visions of this Act, any transaction-
((I) entered into by a designated corporation with

persons not resident in Jamaica; and
(b) which, pursuant to the relevant legislation of

the scheduled State, is the source from which
foreign trade income is determined in estab-
lishing the tax liability of a foreign sales cor-
poration in that State;

“relevant legislation” in relation to any scheduled State
means the legislation of that State which provides
for tax concessions to foreign sales corporations
and which is specified, in relation to the scheduled
State, in the second column of the First Schedule.

(a) is specified in the first column of the First
Schedule; and

“scheduled State” means a State which-

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First
Schedule.

FOREIGN SALES CORPORATION 5

( h ) by its legislation provides for the grant of lax
concessions to foreign sales corporations.

3.---(1) The Minister may, on the application of a foreign power of
sales corporation, grant a certifici: te certifying that the cor- ~ ~ ~ * ~ & ~ f
poration is a designated corporation for the purposes of this ~ c $ ~ ~ ~ ,
Act. to foreign

sales DOT-
poration. (2) A certificate under this section shall, subject to

the provisions of this Act, be valid for a period of fifteen
years and inay from time to time be re-issued for further
periods of fifteen years.

(3) An app!ication for a certificate under subsection
( I ) shall be made in writing to the Minister in such form
and containing such particulars as may be prescribed.

4.-(1) A designated corporation may, by notice in writ- ~ e r m i n a t i ~ n
ing to the Minister, terminate its status as a designated cor- esignated .
poration from such date as may be specified in the notice. corporation.

(2) Subject to subsection (3>, the Minister may, by
notice in writing to a designated corporation, terminate
from such date as may be specified in the notice, the cerli-
fication of that corporation if-

(n) the corporation ceases to be a foreign sales cor-
poration in the scheduled State pursuant to the re-
levant legislation; or

( h ) the Minister is satisfied that the corporation has
failed to comply with the provisions of this Act.

(3) Before terminating a certificate of designation pur-
suant to subsection (2) the Minister shall afford to the cor-
poration an opportunity--

(a) to explain the circumstances of the cessation, or
as the case may be, failure; and

of status as

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6 FOREIGN SAI.ES CORPORATION

(b) if possible. to take such steps as may be appro-
priate to avoid termination.

(4) The status of a corporation as a designated cor-
poration shall, notwithstanding any notice under this sec-
tion and subject to subsection (51, continue until the end of
the jear of assessment in which the notice takes effect or
until-

( U ) such exlier date as the corporation may specify; or

(b) such later date as the Minister, on the application
of the corporation, may allow.

(a) the end of the year of assessment referred to in sitb-
section (4); or

(b) the dale referred to in paragraph (b) of that sub-
section,

the Minister is satisfied as respects any corporation served
with a notice unde: this section that the corporation has
taken such steps as would justify the revocation of that
notice, the Minister may revoke such notice and thereupon
the corporation shall continue in the status of a designated
corporation as if the notice of termination had not been
issued.

(5) Where at any time before-

Relicf from s.-(l) Subject to subsection (2), a designated corporation
shall, in respect of the year of assessment in which it is cer-
tified a disignated corporation and any subsequent year of
assessment. so long as i t remains a designated corporation,
be exempt from income tax (including company profits tax
and additional company profits tax) in respect of income
arising from foreign trade transactions.

(?) A designated corporat.ion shall be relieved of in-
come tax in respect of-

income tax.

(a) interest on loans or deposits; and

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FOREIGN SALES CORPORATION

(b) other approved investment activity.
(3) In this Act “approved investment activity” means

investment in such ventures in Jamaica as the Minister may
from time to time approve for such period and on such
terms and conditions as he may specify.

7

(4) Nothing in this section shall exempt a designated
corporation from its obligation-

(U) to deduct and account to the Commissioner of fiyj,9w,
Inland Revenue for income tax required to be with-
held from emoluments payable to its employees; or

returns and information required pursuant to the
Income Tax Act.

(b) to render to the Commissioner of Inland Revenue, ~&999.

6.--(1) Where a person is entitled, pursuant to a treaty Relief hum
U l m e t a x

tor or
between a scheduled State and Jamaica, to set off against of di-
income tax payable by him in a scheduled State income tax mp~oycta
payable in Jamaica, he shall be entitled to relief from so :i %?
much of the income tax payable by him in respect of the pomti-
emoluments earned by him in the capacity of director or,
as the case may be, employee of a designated corporation
as exceeds his liability to income tax in the scheduled State.

(2) Where such person as referred to in subsection
(1) is not entitled as mentioned in that subsection, he shall
be relieved of so much of the income tax payable by him in
Jamaica as may be required to avoid double taxation of the
emoluments aforesaid.

7 . 4 1 ) A designated corporation shall be exempt from E:firn
the provisions of the Human Employment and Resource =& StaNtOry
Training Act.

(2) A person who is employed in Jamaica as a direc-
tor, or, as the case may be, employee of a designated cor-
poration shall-

mauibu-
ti0n.

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8 FOREIGN SALES CORPORATION

(a) if he is not ordinarily resident in Jamaica, be ex-
empt from the provisions of the enactments re-
ferred to in subsection (4);

(b) in any other case, be liable to pay contributions
or tax pursuant to those enactments.

(3) A designated corporation shall, as regards the en-
actments referred to in paragraphs (a) and (b) of subsection
(4), be exempt from any liability to pay contributions or
tax as an employer but nothing in this subsection shall-

(U) exempt the designated corporation from its liability
to pay contributions under the enactment referred
to in paragraph (c) of subsection (4);

(b) in relation to any employee referred to in para-
graph ( b ) of subsection (2), exempt a designated
corporation from its obligations under all the en-
actments referred to in subsection (4)-

(i) to deduct from the emoluments of the em-
ployee, contributions or tax payable by
such employee and to make payment of the
amount deducted to the appropriate autho-
rity; and

(ii) to make such returns and supply such in-
formation in relation to the employee a~
may be required pursuant to those enact-
ments.

(4) The enactments referred to in subsections (2) and
(3) are-

(#) the National Housing Trust Act;
(b) the provisions of any law for the time being in

force relating to the payment of education tax;
(c) the National Insurance Act.

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FOREIGN SALES CORPORA TION

8 . 4 1 ) Where a shareholder in a designated corporation is
not resident in Jamaica he shall be exempt from income tax in
respect of any dividend paid to him by that designated
corporation out of income exempt or relieved from tax pursuant
to section 5.

(2) The provisions of the Income Tax Act relating to the
) deduction of income tax from dividends to shareholders shall

not apply to dividends exempt from income tax pursuant to
subsection (1).

9.-(1) A designated corporation may effect transactions
relating to its domestic operations with persons resident in
Jamaica and may also, with the prior approval of the Minister,
effect other business transactions with such persons (including
approved investment activities).

(2) No person shall be deemed for the purposes of this
Act to be a person resident in Jamaica by reason only of the fact
that he visits Jamaica from time to time for the purpose of
attending meetings of shareholders or directors of the
designated corporation; nor shall the period of any such visit be
taken into account in determining whether or not a person not
ordinarily resident in Jamaica has become so resident.

1
10. [Deleted vide Act 11 of 1992, S. 2.1

1 1 . 4 1 ) Every designated corporation shall be entitled to
import into Jamaica any equipment, machinery or materials free
of customs duty, stamp duty and general consumption tax

9

Dividends to
non-resident
shawholdcrs
in designated
corporation.

Transactions
with persons
mident in
Jamaica.

Free entry of
machinery
and equip-
ment.

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10 FOREIGN SALES CORPORATION

(hereinafter referred to as customs and similar duties) if the
L.N.
93s/86. Commissioner of Customs is satisfied that such goods are

imported primarily for the purpose of providing facilities for
the carrying out of foreign trade transactions.

(2) Where a designated corporation purchases in
Jamaica goods described in subsection (1) which, pursuant to
that subsection, may be imported free of customs and similar
duties, there shall be a waiver of any such duties or excise duty,

L.N. which the Commissioner of Customs is satisfied have been
93S186. paid, or, as the case may be, are payable in respect of those

goods.

Restrictions
upon the
disposal of
goods im-
ported or
purchased
free of
customs and
similar
duties.

L.N.
93si86.

12. No goods imported into, or purchased in Jamaica
by any designated corporation free of excise duty or customs
and similar duties under the provisions of this Act shall be sold,
given away or otherwise disposed of except-

(a) upon the designated corporation paying or giving
security to the satisfaction of the Commissioner of
Customs for the payment of an amount equivalent to
the amount of excise duty, customs and similar
duties which would have been payable upon the im-
portation or purchase of such goods but for the
provisions of this Act; or

(b) after the expiration of three years from the date of the
importation into, or, as the case may be, purchase in,
Jamaica of such goods.

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FOREIGN SALES CORPORATION I 1

13 .41) There shall be paid by a designated corporation Fees.
SWDd fees in accordance with the provisions of the Second Sche- schaluic.

dule.

(2) The Minister may by order amend the Second
Schedule and any such order shall be subject to affirmative
resolution of the House of Representatives.

14.41) Subject to the provisions of this section, where Exemption
the income in foreign currency of a designated corporation come tax
i s invested in prescribed investment for a minimum period $,:Et-
of five years, there shall be exempt from income tax the in- z;?;&
come arising from those investments.

(2) Where a designated corporation terminates a
prescribed investment within five years from the end of the
year of assessment in which that investment was made, such
corporation shall not be entitled to any relief under subsec-
tion (1).

from in-

(3) In this section ”prescribed investments” means
such imestments as the Minister may from time to time. by
order, prescribe.

15.--(1) The Minister may make regulations generally for Regula.
the better carrying out of the purposes of this Act and in tions.
particular but without prejudice to the generality of the fore-
going may make regulations-

(U) providing for returns to be submitted and infor-
mation to be furnished for the purpose of an appli-
cation for a certificate;

( h ) prescribing records to be kept and the returns to
be furnished by designated corporations;

(c) amending the First Schedule;
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FOREIGN SALES CORPORATlON

(d) prescribing other matters required by this Act to
be prescribed.
(2) Regulations made under subsection ( I ) (c) shall

be subiect to affirmative resolution.

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FOREIGN SALES CORPORATION

FIRST SCHEDULE (Section 2)

Scheduled State Relevant Legislaion

United States of America
including the Common-
wealth of Puerto Rico.

The Deficit Reduction Act of 1984.

SECOND SCHEDULE (Section 13)
1. The fees payable pursuant to section 13 shall be paid by each

(U) initially, on the date on which the ccrtificate is grdnted under
section 3;

( h ) thereafter, on or before the 1st day of January in each sub-
sequent year;

(c) at the rate set out in paragraph 2.

Z.+l) Where the designated corporation has
elected pursuant to the relevant legislation to be
treated as a small foreign sales corporation in
the scheduled state ... ... ... US$ 500 per annum

(2) In any other case ... ... US$l,OOO per annum

designated corporation-

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