Jamaica’s Special Economic Zones: Unlocking Business Opportunities

By Joshua Guiness-Brown

Jamaica took a bold step towards becoming a global logistics hub with the launch of its Global Logistics Hub Initiative in 2015. To enhance its competitive edge and attract investors, the country introduced a series of fiscal incentives.

Among these initiatives, the Special Economic Zones Act, 2016 (SEZA) stands out as a key strategy aimed at driving new and diverse investments into the Jamaican economy.

Understanding Special Economic Zones (SEZs)

Special Economic Zones (SEZs) are designated geographical areas established by the Minister with the objective of fostering investment and stimulating sustainable economic activity. Prior to SEZA, Jamaica operated under the Jamaica Export Free Zone Act, which provided fiscal benefits to entities known as “promoters.”

However, with the introduction of SEZA, free zones were gradually phased out.

Promoters were granted a four-year transition period to enter into master-concession or license agreements with the Special Economic Zone Authority (the “Authority”). This shift was largely driven by Jamaica’s commitment to aligning with the World Trade Organization (WTO) Agreement on Export Subsidies and Countervailing Measures by 2015.

Incentives Under the SEZ Regime

The SEZ framework offers a range of incentives designed to enhance business sustainability and profitability, including:

• Customs duty relief
• Income tax relief, including a 12.5 percent rate on chargeable income
• Income tax relief on rental profits within the zone
• Stamp duty and transfer tax exemptions

SEZ Investment Structure: Developers, Sponsors, and Occupants

Investment in an SEZ project can take different forms, depending on whether an entity participates as a sponsor, developer, occupant, or zone user.

Developers and Sponsors

A developer is defined under SEZA as a company limited by shares, incorporated under the Companies Act, and established by a sponsor to enter into a master-concession or license agreement. Individuals cannot act as developers, but sponsors – who finance SEZ projects—can establish companies for this purpose.

This structure provides sponsors with greater flexibility in determining their level of involvement in a project’s construction and management.

A sponsor is an investor or consortium of investors that provides shareholder capital, either directly or indirectly, to finance a developer’s activities under a master-concession or license agreement.

Master-Concession vs. License Agreements

The Authority has the power to enter into master-concession and license agreements, subject to ministerial approval. The key distinction between the two agreements lies in land ownership:

• Under a master-concession agreement, the Authority holds legal ownership or head lease of the land.
• Under a license agreement, the Authority does not hold such ownership.

Regardless of the agreement type, developers are responsible for financing, constructing, managing, operating, and marketing the SEZ at their own expense.

Opportunities for Occupants

Developers may enter into sub-concession agreements with occupants, defined as entities that conduct business within an SEZ but are neither developers nor zone users. Occupants benefit from fiscal incentives without needing to oversee the construction of the zone.

This allows them to focus on growing their business within a ready-made infrastructure.

A key safeguard for occupants under SEZA is that if a master-concession is terminated prematurely, occupants retain the right to continue operations under their existing sub-concession agreements until a new master-concession is established or the zone is closed. In the interim, the Authority assumes responsibility for the zone’s management and operations, thereby mitigating investment risks for occupants.

Role of Zone Users

A zone user is an entity authorized by the Authority to perform activities or services within an SEZ. While zone users do not qualify for the same fiscal incentives as developers and occupants, they may still benefit from other government incentives.

SEZ Policy Outcomes and Future Potential

The SEZ regime is designed to achieve several key economic objectives:

• Strengthening linkages between SEZs and the broader Jamaican economy
• Expanding export opportunities
• Offering globally competitive incentives with net benefits to Jamaican society

By creating a more business-friendly environment, the SEZ framework has positioned Jamaica as an attractive destination for global investment. With advantages for developers and occupants alike, SEZs are poised to play a pivotal role in the country’s economic growth and international competitiveness.

Joshua Guiness-Brown is an Associate at Myers, Fletcher & Gordon Attorneys-at-Law, located in Kingston, Jamaica.