In a groundbreaking legislative move, the Jamaican Cabinet has sanctioned amendments to the Income Tax Act, enabling employers to provide tax-exempt honorarium payments of up to $200,000 to employees impacted by Hurricane Melissa. This initiative, the first of its kind in the nation’s history, establishes a permanent policy framework for future natural disasters.
Finance Minister Fayval Williams announced the policy during a House of Representatives session, explaining that the amendment creates “a relief support regime that allows for non-taxable treatment of disaster relief honorarium” during officially declared disaster periods. The payments can be distributed in single or multiple installments until March 31, 2026.
The decision comes in response to Hurricane Melissa’s devastating impact on Jamaica’s southwestern parishes on October 28, where the Category 5 storm caused approximately US$8.8 billion in damage, destroyed homes and businesses, and claimed at least 45 lives.
Minister Williams highlighted critical gaps in the existing tax framework, noting that current legislation lacks “a structured mechanism through which temporary disaster relief payments from employers to employees are exempt from income tax” and contains no “statutory provision where disaster relief payments may be accorded non-taxable status on a consistent or system-wide basis.”
The new provisions specifically require that qualifying payments must be strictly for personal recovery and household welfare needs, completely disconnected from employment services, performance metrics, or compensation arrangements. This narrowly targeted approach ensures the exemption supports only those facing abrupt income loss or essential needs deprivation.
To maintain fiscal integrity, the program includes several safeguards: payments are limited to cash disbursements (excluding in-kind benefits that might be construed as taxable emoluments), subject to ministerial caps, and restricted to active disaster declaration periods. Employers must report all payments through monthly payroll submissions to Tax Administration Jamaica and maintain detailed documentation justifying each disbursement.
Interestingly, the government anticipates positive secondary economic effects from the measure. By increasing disposable income and short-term purchasing power for affected individuals, the policy is expected to stimulate demand within the formal economy, potentially offsetting revenue losses through increased consumption tax (GCT) collections.
The legislation represents a significant shift from previous temporary measures toward a structured, statutory approach for disaster response, balancing worker support with maintenance of Jamaica’s income tax system principles.