Wear and tear allowance - Mgi Alekim LLP
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The Tax Laws (Amendment) Act which was assented to on 25th April, 2020 amends various tax legislations.

The Second Schedule to the Income Tax Act which dealt with capital allowances has been repealed and replaced with new second Schedule titled ‘Investment Allowance” whose key highlights are as follows:-

  1. The rate of capital allowances has been rationalized to a maximum of 100%
  2. Claims to be made on reducing balance basis
  3. Decelerated claims: – 50% in the first year of investment and the residual to be claimed at different rates (10% or 25%) on a reducing balance.

The rates of deduction are as follows:-

Capital Expenditure Incurred on:

Rate of Investment Allowance

 

 

(a) Buildings 

 

 
   

i)  Hotel Buildings

 50% in the first year of use

   

ii) Buildings used for manufacture

 50% in the first year of use

   

iii)Hospital buildings

 50% in the first year of use

   

iv)Petroleum or gas storage facilities

 50% in the first year of use

   

v) Residual value to item (a)(i) to a(iv)

 25% per year, on reducing balance

   

vi)Educational buildings including student hostels

 10% per year, on reducing balance

   

vii) Commercial building

 10% per year, on reducing balance

   

 (b)Machinery 

   

 i) Machinery used for manufacture

 50% in the first year of use

   

ii) Hospital equipment 

 50% in the first year of use

   

iii) Ships or aircrafts 

 50% in the first year of use

   

iv)Residual value items (b)(i) to (b)(iii)

 25% in the first year of use

   

v) Motor Vehicle and heavy earth moving equipment

 25% in the first year of use

   

vi) Computer and peripheral computer hardware and software calculators, copiers and duplicating machines

 25% in the first year of use

   

vii)Furniture and fittings

 10% per year, reducing balance

   

viii)Telecommunications Equipment 

 10% per year, reducing balance

   

ix) Filming equipment by a local film producer licensed by the Cabinet Secretary responsible for filming

 25% per year on reducing balance

   

x) Machinery used to undertake operations under a prospecting right

 50% in the first year of use and 25% per year, on  reducing balance

   

xii) Other machinery 

 10% per year, reducing balance

   

 (c) Purchase or an acquisition of an indefeasible right to use fibre optic cable by a telecommunication operator

 10% per year, on reducing balance

   

 (d) Farmworks

 50% in the first year of use and 25% per year, on reducing balance

   
  • Class 1 – includes heavy earth moving equipment and self-propelling vehicles e.g. Lorries above 3 tonnes, forklifts, trucks. The rate is 25 % p.a.
  • Class 2 – computers, photocopiers, scanners. The rate is 10%
  • Class 3 – includes light self-propelling vehicles and other machines such as aircrafts, motorbikes, Lorries under 3 tonnes. The rate is 10%.
  • Class 4 – e.g telephone sets, switch boards, bicycles. The rate is 10%.

 

 

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