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The Second Schedule to the Income Tax Act which dealt with capital allowances has been repealed and replaced with new second Schedule titled ‘Investment Allowance” whose key highlights are as follows:-
- The rate of capital allowances has been rationalized to a maximum of 100%
- Claims to be made on reducing balance basis
- 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:-
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Capital Expenditure Incurred on: |
Rate of Investment Allowance |
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(a) Buildings |
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i) Hotel Buildings |
50% in the first year of use |
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ii) Buildings used for manufacture |
50% in the first year of use |
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iii)Hospital buildings |
50% in the first year of use |
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iv)Petroleum or gas storage facilities |
50% in the first year of use |
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v) Residual value to item (a)(i) to a(iv) |
25% per year, on reducing balance |
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vi)Educational buildings including student hostels |
10% per year, on reducing balance |
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vii) Commercial building |
10% per year, on reducing balance |
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(b)Machinery |
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i) Machinery used for manufacture |
50% in the first year of use |
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ii) Hospital equipment |
50% in the first year of use |
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iii) Ships or aircrafts |
50% in the first year of use |
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iv)Residual value items (b)(i) to (b)(iii) |
25% in the first year of use |
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v) Motor Vehicle and heavy earth moving equipment |
25% in the first year of use |
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vi) Computer and peripheral computer hardware and software calculators, copiers and duplicating machines |
25% in the first year of use |
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vii)Furniture and fittings |
10% per year, reducing balance |
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viii)Telecommunications Equipment |
10% per year, reducing balance |
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ix) Filming equipment by a local film producer licensed by the Cabinet Secretary responsible for filming |
25% per year on reducing balance |
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x) Machinery used to undertake operations under a prospecting right |
50% in the first year of use and 25% per year, on reducing balance |
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xii) Other machinery |
10% per year, reducing balance |
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(c) Purchase or an acquisition of an indefeasible right to use fibre optic cable by a telecommunication operator |
10% per year, on reducing balance |
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(d) Farmworks |
50% in the first year of use and 25% per year, on reducing balance |
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- 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%.
