20% Allowance to Purchase and Renovate Derelict Industrial Buildings

Persons who invest in the purchase and renovation of industrial buildings or structures for the purposes of trade are eligible for a 20 per cent allowance on the capital expenditure.

This is outlined in the Income Tax (Amendment) Act, 2019, which was approved by the Senate recently.

The Bill also gives approval to the increase in the personal income tax threshold, which was implemented on July 1, 2016, by way of a Provisional Order.

Piloting the Bill, Minister without Portfolio in the Ministry of Economic Growth and Job Creation, Senator the Hon. Pearnel Charles Jr., noted that the 20 per cent allowance will encourage the purchase, renovation and retrofitting of buildings and structures that have become derelict or have fallen into disuse.

He said that in relation to the personal income tax section of the amendment, it was recommended on the basis of alleviating the economic hardship that was being experienced by Jamaican taxpayers and workers below the threshold as well as to provide low-income earners with additional disposable income.

“Part of this measure was also in respect of an increase in the income tax rate from 25 per cent to 30 per cent for individuals whose statutory income was in excess of $6,000,000.00,” he pointed out.

Senator Charles noted that the increase in the income tax threshold was implemented on July 1, 2016, by way of a Provisional Order pursuant to section 3 (1) of the Provisional Collection of Tax Act (“The Act”).

“Pursuant to the Act, the Order was confirmed with modifications and extended for a further three months. However, since the period of confirmation with modification and extension, the Order has lapsed and the collection of the tax needs to be validated. It is further proposed that the Government and all those persons who acted in good faith on behalf of the Government in the collection of the tax be indemnified from July 1, 2016 and ending on the commencement date of the amendment of the Income Tax Act,” he explained.

Senator Charles said the Income Tax (Amendment) Bill seeks to amend sections 13, 30, 67 and 68 of the Income Tax Act in relation to the increase in the personal income tax threshold; and the First schedule, parts I and II of the Income Tax Act in relation to the 20 per cent initial allowance on capital expenditure.

Senator Charles said Clause Two amends section 13 of the Principal Act regarding Deductions Allowed.  “A provision was inserted to state that expenses and disbursements shall only be deducted in respect of the six-month period in which they were actually incurred,” he said.

He noted that Clause Three amends section 30 of the Principal Act regarding the Rate of Income Tax, noting that the new nil rates and the respective income tax rates for the year of assessment are inserted into this section.

Senator Charles said that Clause Four amends section 67 (7) (a) of the Principal Act regarding returns, adding that the new threshold amounts for the respective years of assessment are inserted.

He said Clause Five treats with section 68 of the Principal Act. “There is a marginal note that has been inserted with the new nil rates for the year 2016 as well as in subsection (b), the new nil rates are inserted,” he said

Clause six of the Bill, he pointed out, updates Parts I and II to reflect the policy with the new insertion of “purchase for renovation”.

“In part II, a new sub-paragraph was inserted to state that the initial allowance in relation to the purchase for renovation shall only be made to the owner if the building or structure is brought into use as an industrial building or structure during the first four years of assessment,” Senator Charles said.

He said in keeping with the policy intent, new insertions were made to state the circumstances under which the initial allowance will be recovered. “If after four years, it’s not in use for the particular type of trade as indicated, it can be recovered. If the renovation is not completed, it can be recovered, and if the capital expenditure is less than 80 per cent of the purchase cost of the building, it can be recovered,” he pointed out.

Senator Charles also noted that the Bill also contains a validation and indemnity clause regarding the lapsed Provisional Order, which brought about the increase in the personal income tax threshold.