What is the Capital Allowance?

What is the Capital Allowance?

The application of the capital allowance reduces the proportion of company’s income against which the corporate income tax will be charged. The Omnibus Incentives regime provides for an initial 20% allowance on capital expenditure related to construction, alteration and renovation of industrial buildings.  Expenditure related to the purchase of an industrial building will not qualify for the initial allowance. 

Assets purchased on or after January 1, 2014 are written off in accordance with the new capital allowance regime.

Specifically, under the Fiscal Incentives Act, the specific advantages of the revised capital allowance regime include:

  • Standardized write-off rates on a straight-line basis
  • Increased write-off rates of non-industrial buildings from 2.5% on the reducing balance to 4% on a  straight-line calculation
  • Increased the cap for private motor vehicles from J$3,200 to the Jamaican dollar equivalent of US$35,000.  Second-hand vehicles do not qualify.
  • Significantly improved list of qualifying intellectual property rights, including patents, trademarks, copyright, industrial design, internet domain name or publishing title

In addition, the definition of industrial buildings is significantly expanded to include:

  • building or structure used directly in the production of primary products;
  • hotel licensed by Jamaica Tourist Board (JTB);
  • hospital and certain other healthcare facilities (as defined in the Act);
  • multi-storey car park;
  • building located in an Export Free Zone area designated as such by the Jamaica Export Free Zones Act
  • building or structure constructed pursuant to a public-private partnership arrangements