Yaneek Page | Car rental companies’ eligibility for duty concessions

In my previous column, I detailed the steps to acquire a licence for the operation of a motor car rental company by way of facilitating agency Tourism Product Development Company or TPDCo.

Readers may also recall that there was one critical piece of information in relation to strategic planning for prospective car rental company operators that I had not yet received from the TPDCo and which was not available on their website, that is, the eligibility for import duty concessions in relation to motor vehicles. In other words: Can a licensed rental car operator acquire vehicles for rental business at a substantially lower cost than market value because of waivers or concessions in taxes, and how?

I have since received confirmation from the TPDCo that licensed rental-car companies may be eligible for concessions and a brochure detailing the application process, requirements, and terms and conditions.

You should note in your competitor analysis that many persons currently operating car-rental companies, with whom registered entities may compete indirectly, aren’t registered and would, therefore, be ineligible for any industry concession or benefit. They also may not adhere to the licensing requirements having to do with location, trained staff, and liability insurance, among others.

In response to my question on whether there is a requirement for licensed motor car rental companies to have a fleet of at least 10 vehicles to access requisite motor vehicle duty concession, the TPDCo sent me the following response:

All concessions for motor vehicles are processed by the Ministry of Tourism, which has responsibility for all concessions granted to tourism operators. TPDCo as an agency of the ministry helps to facilitate the process by collecting the requisite fees from the operators.

a. A car-rental operator must be in possession of five vehicles in order to apply and obtain a Jamaica Tourist Board (JTB) car-rental licence.

b. After one year of being in possession of a JTB car-rental licence, the operators can apply to the Ministry of Tourism for a car concession, once they have a fleet of at least 10 vehicles.

c. I have attached a copy of the application form and the brochure in relation to the car concession, which details the information, which should be of assistance to you.

d. You can contact the following persons at the Ministry of Tourism should you seek further clarification:

• Jhanelle-Rae Bowie

Director, Tourism Economics and Facilitation

jhanelle-rae.bowie@mot.gov.jm

• Tamar Henry

Tourism Incentives and Facilitation Analyst

tamar.henry@mot.gov.jm .

Unfortunately, space won’t permit the publication of the entire brochure, however, I have highlighted some critical areas based on the request from the reader who initially sought the assistance of Businesswise on this issue.

Costs and requirements

According to the brochure titled “Fiscal Incentives Regime (Omnibus) Car Rental Subsector” and revised July 2015:

Since 2014, car-rental operators within the tourism ground transportation subsector now benefit under a formalised piece of legislation called FIMP or the Fiscal Incentives Modernisation Provisions Act 2013 as opposed to a ministerial discretionary waiver system. Under FIMP, tourism licensed car-rental operators are allowed:

• Motor cars as per Section 11 of the Road Traffic Act, with cc rating up to a maximum of 2500 and CIF up to a maximum of US$3,5000 under the PIR to be accessed at 100% per cent relief on applicable CET. General consumption tax of 16.5 per cent, applicable special consumption tax and all other fees remain payable;

• Vehicles exceeding any of these limits will not be allowed hereunder and subject to their full tax liability;

• The sector may import up to 800 vehicles per year;

• Car-rental industry will only be allowed to access benefits on 10- to 16-seater buses;

• Car-rental industry will continue to keep motor vehicles for a minimum of 24 months before resale; and

• Concession will be granted for new vehicles only, defined by the Customs Act as a vehicle under six months from the date of landing in Jamaica or driven no more than 3,000km and not previously owned.

Each application attracts a non-refundable processing fee made payable to TPDCo: 1-5 vehicles – $2,500; 6-9 vehicles – $5,000; and 10+ vehicles – $10,000.

The required application documents include: application form; copy of JTB licence and TCC; final invoice from dealer; bill of laden and shipping documents; and receipt indicating 25 per cent deposit on vehicles being imported

Some terms and conditions

Failure to rent vehicles within 90 days of the vehicle being registered may result in a ban from receiving further concession for one year. Concession will only be granted to car-rental entities registered with Companies Office of Jamaica.

Vehicles shall not be rented with an intention to sell or rent on lease-purchase arrangements or lease agreements. For the purpose of the concession, a lease is defined as “an agreement for a fixed term at a fixed rental of not less than one year being in respect to a specific motor vehicle”.

An agreement for a fixed term of less than one year, but which is subject to renewal that will cumulatively cause the agreement to exceed one year, will be interpreted to be a lease agreement.

The operator shall be liable for payment of full duties if found in breach of the terms and conditions, which may be revised without notice.

Please note that information shared above must form an essential part of the financial and operational planning and business model, overall, for prospective car-rental company operators. Close attention should also be paid to how soon vehicles may be sold and the potential profit or loss associated with such sales as there may be a bonus income stream here depending on how it is managed. Best of luck and one love!

- Yaneek Page is the programme lead for Market Entry USA, a certified trainer in entrepreneurship, and creator and executive producer of The Innovators and Let’s Make Peace TV series. yaneek.page@gmail.com