Part II - Special Economic Zones: Who wants to taste a piece of the pie?
Doing business in a SEZ
A part of Jamaica’s Special Economic Zones (“SEZ”) vision is to grow Jamaica’s global value chain footprint through the development of the SEZ which will in turn stimulate economic growth. Occupants of a SEZ play a very crucial role in achieving these objectives.
An occupant of a SEZ is a person, other than a developer of a SEZ or a ‘zone user’, who conducts business in a SEZ pursuant to the terms and conditions set out in a sub-concession agreement it has entered into with a developer of that SEZ.
The sub-concession agreement made between the developer and the occupant cannot come into force until the developer has applied for and obtained an authorization from the Special Economic Zones Authority (the “Authority”) with respect to the sub-concession. The Special Economic Zone Act, 2016, (the “Act”) states that the Authority will only grant an authorization with respect to a sub-concession where it is satisfied that:
- the sub-concession is consistent with the terms and conditions of the agreement between the developer and the Authority;
- the sub-concession complies with the provisions under the Act; and
- the occupant is not engaged, and there is no reason to suspect that the occupant will engage in any money laundering or other financial crimes, the financing of terrorism; the manufacture or proliferation of weapons of mass destruction or any of the excluded activities listed in the Act.
The prohibited activities
A developer or an occupant is prohibited from directly or indirectly carrying on the following activities in a SEZ:
- Extractive industries, including mining, quarrying or drilling for natural resources (excluding authorized extraction for developer’s and occupant’s own use);
- Tourism services;
- Telecommunications services;
- Public utilities (with a few exceptions);
- Financial services regulated by the Bank of Jamaica or the Financial Services Commission;
- Construction services, unless as part of a manufacturing process within a SEZ;
- Real estate;
- Health services, excluding research and development;
- Catering services;
- Retail trade; and
- Any other activities which the Minister responsible for Industry may specify.
The applicant may be authorized to conduct an economic or social activity to be undertaken by it as an occupant in a SEZ which is not an excluded activity listed above, and does not contravene public policy, public safety, national security; violate any applicable environmental, heritage or labour laws; or violate any intellectual property rights.
The Application Process
In order to be eligible to apply for status as an occupant of a SEZ, the applicant must be a company incorporated under the Companies Act of Jamaica. Each applicant is required to submit the following along with the completed application form:
- The prescribed application fee;
- a certified copy of the memorandum and articles of association or articles of incorporation and certificate of incorporation of the applicant established as a company limited by shares;
- a certified copy of the Taxpayer Registration Number of the applicant established as a Jamaican Business Entity and, if applicable, the General Consumption Tax (GCT) registration issued by the Tax Administration Jamaica and the applicant’s Tax Compliance Certificate (TCC) Number;
- an affidavit setting forth all relevant commercial information of the Applicant, including its name, address, nationality, owners, board of directors (or equivalent management committee), auditors, and bankers, as well as the share ownership of the applicant;
- the relevant land-occupancy documents;
- information regarding investments in SEZ-related buildings, equipment, machines, facilities and other necessary assets during the first year of the sub-concession which must not be less than US$50,000;
- an affidavit in which the applicant gives an undertaking to fulfill the obligations as set out in the Act; and
- an undertaking from the developer that declares that the applicant will fulfill the obligation as set out in the Act.
The Authority will review the application after it is submitted and ought to notify the applicant within seven (7) days after having received the application whether there are any deficiencies and to request any further information it may require to correct the deficiencies. The applicant will have a period of fifteen (15) days to correct the deficiencies, failing which the application may be rejected. If the Authority does not notify the applicant of any deficiencies within the seven (7) day period after having received the application, the application is deemed to be complete, but the applicant may still be required to submit further information to the Authority.
Once the application has been approved by the Authority and the sub-concession agreement comes into effect, the applicant has successfully become an occupant of the SEZ and can start to benefit from the fiscal incentives under the Act.
Companies may wish to take advantage of an opportunity to offer their goods and services to persons within a SEZ by setting up a business location in the SEZ and becoming a ‘zone user’.
For example, someone may wish to set up a restaurant to provide food and beverage services to employees of the authorized entities operating within the SEZ. Unlike the developers and the occupants, however, zone users are not entitled to the benefits and incentives granted under the Act, other than the exemption from stamp duty in respect of instruments for the sale or lease of land by the zone users in connection with their business operations within the SEZ.
A zone user must submit an application to the developer of the SEZ along with similar supporting information listed above. If having reviewed the application the developer is satisfied that the applicant is able to carry on the proposed activity, the developer may make a written request to the Authority for the issue of an authorization to the applicant to become a zone user. If the Authority is in agreement, it will issue that authorization which will make explicit the legal rights and obligations of the zone user and will contain provisions relating to the duration, renewal, voluntary discontinuation, suspension, cancelation or revocation of the authorization.
Investments by a zone user in SEZ related activities must be greater than US$50,000 within the first year of operation.
In Part III of this series, I will take a look at MSMEs (micro, small and medium enterprises) and how they too may be able to get a taste of the SEZ pie.
Jezeel Martin is an Associate Attorney-at-Law at Myers, Fletcher and Gordon, Attorneys-at-Law, in the Commercial Department. He may be contacted at firstname.lastname@example.org or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.