Schedule 2Amendments to Schedule 2 by Act 15 of 2003 takes effect in respect of income year 2002. See section 5(2) of Act 15 of 2003.
(Sections 26, 27, 33, 38 and 40)
CAPITAL ALLOWANCES
PART 1
BUILDINGS
1. Annual allowances
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(1) In ascertaining the assessable income of any person for any year of income from the carrying on by that person or by a lessee from that person of any qualifying business (within the meaning of paragraph 3), there shall be deducted in respect of any building used for the purposes of such qualifying business carried on by that person or lessee an annual allowance of—
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(a) an amount equal to 5% of the written down value of the building, not being a commercial building, at the end of the immediately preceding income year;
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(b) in case of a commercial building, an amount equal to 2.5% of the written down value of the building at the end of the immediately preceding income year.
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(Substituted by Act 15 of 2003)
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(2) For the purposes of this paragraph the written down value of a building at the end of a year of income means—
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(a) in the case of the first year of income in which the building is used, the cost of such building less the annual allowance allowed in respect of such building for that year of income; and
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(b) in the case of subsequent years in which the building is used, the written down value at the end of the income year for the immediately preceding year of income less the amount of the annual allowance on such building for the year of income.
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(3) Where a building commences to be used for the first time in a year of income the written down value for that year of income for the purposes of this paragraph shall be—
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(a) where the building is a newly erected or purchased building, the cost of erection or purchase thereof;
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(b) where the building is an existing building which has been used for purposes other than the carrying on of a qualifying business, the cost thereof less notional allowances calculated in accordance with subparagraph (1) in respect of each year during which the building has been owned.
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(4) Where a building was in use for the purposes of a qualifying business on the last day of the year of income 1988, the written down value ascertained in accordance with the provisions of the previous Act apply.
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(5) Where a building in respect of which deductions have been allowed under this paragraph ceases to be used for the purposes of a qualifying business for one or more years of income but subsequently commences to be used for such purposes or is disposed of, notional annual allowances calculated in accordance with subparagraph (1) shall be calculated for each year during which the building was not used for business purposes in order to ascertain—
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(a) the written down value of the building in relation to subsequent years of income; or
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(b) the adjusted cost of the building for the purposes of paragraph 2.
2. Disposal of building
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(1) Where allowances have been granted to any person for previous years of income, whether before or after the coming into operation of this Act, in respect of a building and that building is disposed of in any year of income, a balancing allowance or a balancing charge shall be made as provided in this paragraph.
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(2) Where the cost, or the adjusted cost of a building exceeds the aggregate of—
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(a) the allowances granted for previous years of income; and
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(b) the disposal value;
the amount of such excess (referred to in this Act as “a balancing allowance”) shall be allowed as a deduction for the year of income in which the building is disposed.
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(3) Where the disposal value of a building exceeds the difference between—
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(a) the cost, or the adjusted cost, of such building; and
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(b) the allowances granted for previous years of income,
the amount of such excess (referred to in this Act as “a balancing charge”) shall be included in the assessable income of the person disposing of the building for the year of income in which the building is disposed.
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(4) For the purposes of this Part, the adjusted cost of a building means the cost of erection or purchase thereof less the amount of any notional allowances under paragraph 1(3) or 1(5), in respect of any year of income during which the building was used other than for qualifying business purposes.
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(5) Where a person has been granted allowances in respect of a building, and such person ceases to carry on business prior to the disposal of such building, for the purposes of this paragraph he or she shall be subject to the provisions of this paragraph in the event of the subsequent disposal of the building.
3. meaning of building
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(1) For the purposes of this Part, a building means a building used for the purposes of carrying on any qualifying business, and includes a building provided by way of welfare facilities for employees but does not include a building used for residential purposes. (Substituted by Act 15 of 2003)
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(2) Where part only of a building is used for the purposes of a qualifying business, and the capital expenditure on that part of the building which is not so used—
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(a) does not exceed 11% of the total capital expenditure the whole of the building is considered to be used for the purposes of a qualifying business;
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(b) exceeds 11% but does not exceed 75% of the total capital expenditure, then the portion of such expenditure qualifying for deduction under this Part is such proportion of such expenditure as the part of the building so used for the purposes of a qualifying business bears to the entire building;
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(c) exceeds 75%, then the entire building is considered not to be used for the purposes of a qualifying business.
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(3) For the purposes of this Part a “qualifying business” means—
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(a) a business carried on in a commercial building, mill, factory or similar premises for the manufacture of goods or materials or their subjection to any industrial process;(Substituted by Act 15 of 2003)
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(b) the operation of a dock or a water or electricity undertaking;
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(c) the extraction of natural resources by mining or drilling;
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(d) the catching or taking of fish including shell fish; or
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(e) a business of agriculture, including horticulture and the use of land for the purposes of husbandry including the keeping or breeding of livestock and poultry or the growing of crops of fruits or vegetables.
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(f) a commercial undertaking or trade, except an undertaking or trade determined to be an approved Tourism project as defined by the Tourism Incentive Act, or any enactment replacing it. (Inserted by Act 15 of 2003)
PART 2
PLANT AND MACHINERY
1. Annual allowances
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(1) In ascertaining the chargeable income of any person for any year of income there shall be deducted an annual allowance in respect of expenditure incurred, whether before or after the commencement of this Act, on the provision of plant and machinery acquired and brought into use by that person for the purpose of producing assessable income.
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(2) The deduction allowable shall, subject to subparagraph (3), be an amount equal to the following percentages of—
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(a) the cost of the plant and machinery, in the case of the year of income in which the plant and machinery was first brought into use; and
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(b) the written down value of the plant and machinery at the end of the income year for the immediately preceding year of income in the case of subsequent years of income—
| (i) | Agricultural plant and machinery— | |
| (A) | electrical, including meters | 15% |
| (B) | spraying equipment | 15% |
| (C) | other | 10% |
| (ii) | Aerated beverage plant— | |
| (A) | Electrical | 15% |
| (B) | Steam | 10% |
| (iii) | Aircraft, parts and equipment | 33 1/3% |
| (iv) | Bakery plant and machinery | 15% |
| (v) | Bicycles | 25% |
| (vi) | Block and brick manufacturing plant and machinery | 15% |
| (vii) | Cigarette manufacturing machinery | 15% |
| (viii) | Cinematograph— | |
| (A) | Machinery (projectors) | 20% |
| (B) | Electrical appliances including fans and public address systems | 15% |
| (C) | Seating | 15% |
| (ix) | Clothing Trade— | |
| (A) | Steam boilers, engines and similar plant and machinery | 10% |
| (B) | General Machinery including sewing machines | 15% |
| (C) | Electrical plant and machinery | 15% |
| (x) | Copra crushing and refining plant | 15% |
| (xi) | Cranes and hoists | 15% |
| (xii) | Diesel engines and motors | 15% |
| (xiii) | Electricity undertakings— | |
| (A) | Generating plant | 15% |
| (B) | Mains | 10% |
| (C) | Other equipment water turbines and transformers | 10% |
| (xiv) | Electrical lifts | 15% |
| (xv) | Engineering workshops— | |
| (A) | Electrical equipment | 15% |
| (B) | Heavy plant | 10% |
| (C) | Lathes and milling machines | 15% |
| (D) | Welding plant, tools and instruments | 15% |
| (xvi) | Furniture Workshops— | |
| (A) | Electrical equipment | 15% |
| (B) | Other | 15% |
| (xvii) | Furniture | 15% |
| (xviii) | Garages— | |
| Gasoline and Kerosene tanks and pumps | 10% |
| (xix) | Gas— | |
| (A) | Gas holders or containers | 10% |
| (B) | Other plant | 10% |
| (xx) | Ice manufacture and Cold stores— | |
| (A) | Electrical plant and insulation | 15% |
| (B) | Refrigeration machinery, compressors, condensers, tanks, etc. | 15% |
| (C) | Steam and gas engines | 10% |
| (xxi) | Laundry and dry cleaning— | |
| (A) | Steam boilers, engines and similar plant and machinery | 10% |
| (B) | General machinery | 15% |
| (C) | Electrical plant and machinery | 15% |
| (xxii) | Motor cars, lorries, omnibuses, vans, jeeps, tractors, trucks, land rovers | 25% |
| (xxiii) | Motor cycles | 25% |
| (xxiv) | Neon signs | 15% |
| (xxv) | Office appliances: Accounting, adding, calculating, cash registers and duplicating and copying machines, typewriters | 15% |
| (xxvi) | Oil tanks and pumps | 10% |
| (xxvii) | Photographic equipment | 15% |
| (xxviii) | Printing— | |
| (A) | Plant and machinery | 10% |
| (B) | Type | 15% |
| (C) | Computer hardware | 25% |
| (D) | Computer software | 33 1/3% |
| (xxix) | Pumps— | |
| (A) | Electric | 15% |
| (B) | Other | 10% |
| (xxx) | Radio equipment— | |
| (A) | Amplifiers and receivers | 15% |
| (B) | Lines and speakers | 10% |
| (xxxi) | Refrigeration, deep freeze and refrigeration cabinets | 15% |
| (xxxii) | Rum plant and breweries: Boilers, pumps, stills and vats | 10% |
| (xxxiii) | Stoves | 15% |
| (xxxiv) | Scales | 10% |
| (xxxv) | Shipping: Launches, lighters, canoes and sail boats | 15% |
| (xxxvi) | Traction and hauling equipment | 25% |
| (xxxvii) | Trailers | 15% |
| (xxxviii) | Timber merchants— | |
| (A) | Saw milling machinery and electrical motors | 15% |
| (B) | Steam engines and boilers | 10% |
| (xxxix) | Waterworks: Appliances and apparatus used for storage, purification, conveyance, measurement or regulation of water | 10% |
| (xl) | Plant and machinery not elsewhere specified | 15% |
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(3) Where the Comptroller is satisfied that by reason of the use of plant and machinery on multiple shift work or in other circumstances of abnormal wear and tear, he or she may authorise the deduction of such higher rate of allowance than is provided by subparagraph (2) as appears to him or her to be reasonable in the circumstances.
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(4) For the purposes of this paragraph the written down value of any plant and machinery at the end of the year of income means—
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(a) in the case of the first year of income in which the plant and machinery is acquired, the cost of such assets less the annual allowance, allowed in respect of such assets for that year of income;
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(b) in the case of subsequent years the written down value at the end of the income year for the immediately preceding year of income less the annual allowance allowed in respect of such assets for that year of income.
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(5) Where expenditure had been incurred prior to the commencement of this Act, the written down value at the end of year of income 1987 ascertained in accordance with the previous Act shall apply for the purposes of subparagraph (4)(b).
2. Disposal of plant and machinery
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(1) Where allowances have been granted to any person for previous years of income, whether before or after the coming into operation of this Act, in respect of plant and machinery and any such asset is disposed of in any year of income, a balancing allowance or a balancing charge shall be made as provided in this paragraph.
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(2) Where the cost of the asset exceeds the aggregate of—
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(a) the allowances granted for previous years of income; and
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(b) the disposal value,
the amount of such excess (referred to in this Act as “a balancing allowance”) shall be allowed as a deduction for the year of income in which the asset is disposed of.
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(3) Where the disposal value of the asset exceeds the difference between—
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(a) the cost of the asset; and
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(b) the allowances granted for previous years of income,
the amount of such excess (referred to in this Act as “a balancing charge”) is to be taken into account in ascertaining the assessable income of the person disposing of the asset for the year of income in which the asset is disposed of.
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(4) Where a person has been granted allowances in respect of any plant and machinery and such person ceases to carry on business prior to the disposal of such asset, for the purposes of this paragraph he or she shall be subject to the provisions of this paragraph in the event of the subsequent disposal of such plant and machinery.
3. Replacement property
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(1) Where but for this paragraph the amount of any balancing charge would be taken into account in ascertaining the assessable income of any person for a year of income, that person may elect, by notice in writing given to the Comptroller when furnishing his or her return of income for that year and that in lieu of the balancing charge being so taken into account it may be deducted, subject to subparagraphs (2) and (3), from expenditure incurred on any plant and machinery (hereinafter referred to as “the replacement property”) acquired by him or her during the year of income to replace the plant and machinery disposed of.
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(2) Where an election is made under this paragraph the expenditure incurred on the replacement property is to be reduced by the amount of the balancing charge referred to in subparagraph (1) for the purpose of determining the written down value of the replacement property and the annual allowances applicable, but nothing herein affects the calculation of any balancing allowance or balancing charge by reference to the full amount of the expenditure incurred and the reduction of balancing charge made by subparagraph (1) in the event of the subsequent disposal of the replacement property.
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(3) Where an election is made under this paragraph in relation to the disposal of an asset giving rise to a balancing charge which exceeds the cost of the replacement property—
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(a) no annual allowance shall be granted in respect of the replacement property; and
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(b) the amount of the excess shall be included in the assessable income of the person disposing of the asset for the year of income in which the asset is disposed.
PART 3
AGRICULTURAL EXPENDITURE
1. Deduction allowed
Subject to this Part, where any person who is not exempt from tax under section 25 in respect of income from agriculture incurs capital expenditure on any agricultural works there is to be allowed as a deduction for the year of income for which the expenditure was incurred and in the next succeeding 4 years of income an amount equal to 1/5 of such expenditure.
2. Certificate to be furnished
The deduction provided by this Part shall not be given until the person claiming such deduction furnishes to the Comptroller a certificate signed by the Director of Agricultural Services stating that—
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(a) the agricultural works for which the deduction is claimed have been carried out; and
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(b) the expenditure incurred is fair and reasonable.
3. Deduction allowable on disposal
Where any person, who has incurred capital expenditure to which this Part relates, disposes of such property prior to the grant of the full amount of the allowances to which he or she would have been entitled had the disposal not taken place he or she ceases to be entitled to any further deduction and the balance is allowed to the person who acquires the property.
4. Apportionment of deduction
For the purposes of paragraph 3, where a property is disposed of on a date other than the end of an income year or where part only of a property is disposed of, the Comptroller may apportion the deduction allowable as between the parties in such manner as appears to him or her to be reasonable.
5. Meaning of capital expenditure on agricultural works
In this Part “capital expenditure on agricultural works” means expenditure incurred in respect of the clearing, draining or planting of land for agricultural purposes, soil conservation works, the provision of drains, wells, boreholes or dipping tanks and the cutting of new roads to areas of production.
PART 4
INTERPRETATION
1. Definitions
In Parts 1 and 2 of this Schedule—
“allowances granted” in relation to previous years of income means the sum of the annual allowances granted under this Schedule or the corresponding provision of the previous Act and any initial allowances granted under the previous Act;
“disposal” in relation to any assets means the scrapping, loss or destruction, sale, exchange, compulsory acquisition or gift of such asset;
“disposal value” means, in relation to—
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(a) the scrapping of an asset, the scrap value thereof;
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(b) the loss or destruction of an asset, any amount received for the remains thereof together with any amount accrued as compensation or indemnity for such loss or destruction;
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(c) the disposal of an asset, by way of—
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(i) sale, the net proceeds of sale,
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(ii) exchange, the market value of any asset acquired through such exchange adjusted to take account of any monetary consideration made,
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(iii) compulsory acquisition, the amount for which it was so acquired,
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(iv) gift, the market value thereof,
but in any case where the amount accrued or the market value exceeds the cost, the disposal value is limited to the cost price, or in the case of a building the adjusted cost price, if applicable;
“expenditure incurred” by any person does not include such part of any expenditure incurred as is reimbursed to that person by way of subsidy or grant by the Government or some other person unless such subsidy or grant has formed part of his or her assessable income.
2. Application of Schedule to hire purchase transactions
Where, under a hire purchase agreement or similar transaction, the use and enjoyment of an asset is obtained by a person to whom this Schedule applies for a period of time at the end of which the property in the asset will or may pass for no consideration or a nominal consideration, he or she is considered to have—
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(a) acquired the asset at the time the agreement or transaction was entered into; and
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(b) incurred expenditure thereon of an amount equal to the total amounts, excluding interest, payable under the agreement or transaction at the time referred to in subparagraph (a).
3. Apportionment of consideration where assets sold for consolidated amount
Where any property, in respect of which allowances are granted under this Schedule or the previous Act is disposed of together with other assets for a total consideration—
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(a) which does not allocate separate prices for the separate items; or
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(b) which allocates either a nominal consideration to some assets, or such consideration as, in the opinion of the Comptroller does not represent the true market value of those assets,
he or she may apportion the total consideration among the several assets in such manner as to arrive at a true market value of those assets in respect of which allowances have been granted and such value shall be taken to be the disposal value of such assets for the purposes of this Schedule.
4. Disposal of assets in certain transactions: value to be adopted
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(1) Where any assets in respect of which allowances have been granted under this Schedule or the previous Act or both, are disposed of by the owner to a purchaser other than by way of a transaction at arm's length, subject to subparagraph (2) the assets are considered to have been disposed of at market value and such value shall apply both to the vendor and the purchaser.
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(2) Where—
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(a) under the amalgamation, reconstruction or merger of a company with another company and the transfer of assets to that other company; or
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(b) the transfer of assets from an individual to a company or to a relative,
there is a substantial identity between the former owner and the new owner, the assets in relation to both, are considered to have been disposed of at their written down value.
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(3) For the purposes of subparagraph (2) there is a substantial identity between the former owner and the new owner—
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(a) in the case to which subparagraph (2)(a) applies, where at the end of the year of income in which the assets were transferred, shares in the company acquiring the assets, carrying—
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(i) the right to exercise not less than 51% of the voting power in the company,
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(ii) the right to receive not less than 51% of any dividends that might be paid by the company, or
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(iii) the right to receive not less than 51% of any capital distribution in the event of a winding up or of a reduction in the share capital of the company, were beneficially held by persons or relatives of such persons who at the time the assets were transferred beneficially held in the disposing company shares carrying rights of those kinds;
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(Amended by Act 15 of 2003)
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(b) in a case to which subparagraph (2)(b) applies, where at the end of the year of income in which the assets were transferred, in the case of a transfer to a company, shares carrying rights of the kind specified in subparagraph (a) were beneficially held by the vendor or relatives of the vendor.
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(4) In subparagraphs (2) and (3) “a relative” in relation to any person means—
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(a) the spouse of that person; or
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(b) a lineal ancestor, child or other lineal descendant, brother, sister, uncle, aunt, nephew or niece of that person or of his or her spouse.