V. Allowances

With respect to corporation tax, there are certain deductions from a company’s chargeable profits that are allowed under the Corporation Tax Act, Chapter 75:02 (as amended), Income Tax Act, Chapter 75:01 (as amended), and Income Tax (In Aid of Industry) Act, Chapter 85:04 (as amended). These deductions include allowances for promotional expenses, wear and tear and capital expenditure.

• a. Promotional Expenses Allowance

  The Promotional Expenses allowance is equivalent to one hundred and fifty percent (150%) of the amount actually expended for the purpose of creating or promoting the expansion of foreign (export) markets. The allowance is given for:

  1. advertising in foreign markets;
  2. providing promotional literature for overseas distribution;
  3. participating in trade fairs and similar promotional activities;
  4. overseas travel for the purposes of conducting promotional activities;
  5. providing free samples and technical information on products;
  6. inviting buyers to Trinidad and Tobago;
  7. the recruitment of specialist sales personnel operating in foreign markets, for a maximum of two (2) years;
  8. conducting foreign market surveys

  NOTE: When a company receives this deduction under Section 10(b) of the Corporation Tax Act, Chapter 75:02 (as amended), it does not qualify for a similar Promotional Expenses allowance under Section 10(a) of the Income Tax Act, Chapter 75:01 (as amended).

  Eligibility Criteria
  
  

  The Company/Applicant must: -

  1. be registered, incorporated and a resident in Trinidad and Tobago;
  2. have incurred promotional expenses for the export of architectural engineering, design, quantity surveying or contracting services in connection with the building industry or for the export of goods and agricultural produce manufactured in Trinidad and Tobago and shipped in commercial quantities.
  3. have exported goods as a result of the promotional expenses incurred.

  This deduction does not apply to:

  1. Expenses incurred in petroleum operations;
  2. Expenses incurred for the export of goods to Antigua, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts-Nevis, St. Lucia, St. Vincent and Suriname.
  
  
  

• b. Capital Expenses Allowance

  Depreciation charged in the annual financial statements is not deductible for taxation purposes. It is replaced in the computation of taxable income by initial and annual wear and tear allowances. The rates of annual wear and tear allowances are set out in the seventh schedule of the Income Tax Act, Chapter 75:01 (as amended). Broadly, they are intended to recover the cost over its useful life. Wear and tear allowances must be calculated on the reducing balance basis on actual cost. Indexation for inflation is not permitted.
  
  

  1. Machinery and Equipment

     This category includes not only manufacturing machinery and equipment but also such items as office equipment, furniture, fixtures and fittings, vehicles and ships.

     Manufacturing companies, under the Income Tax (In Aid of Industry) Act, Chapter 85:04 (as amended), are entitled to an initial allowance of 90% of initial costs for machinery and equipment. All companies are entitled to annual wear and tear allowances on their machinery and equipment, calculated according to the declining-balance method. In the first year, the initial and annual allowances are calculated on cost. Thereafter, annual allowances are calculated on the balance of cost after deducting the allowances previously granted. With effect from January 1, 1995, additions to fixed assets will be pooled in various categories. Tax depreciation rates (wear-and-tear allowances) have been standardised by the seventh schedule to the Income Tax Act, Chapter 75:01 (as amended). Fixed assets are to be classified into one of four classes:

     Class	Rate
     A – Buildings and improvements	10%
     B – Motor Vehicles, furniture and fittings, plant and machinery	25%
     C – Heavy equipment, motor lorries, trucks and computer equipment	33.3%
     D – Extra heavy equipment, airplanes	40%

     
     

  2. Industrial Buildings

     With effect from January 1, 1995 newly constructed buildings used for the production of income (i.e. industrial, commercial and rental properties) will receive a 10% wear and tear allowance using the declining-balance method.  Industrial buildings include factories, warehouses, and housing for workers as well as other buildings provided for their welfare, such as sport pavilions.

     NOTE: Where a company is entitled to benefit under –

     1. the Fiscal Incentives Act, Chapter 85:01 (as amended)
     2. the Trinidad and Tobago Free Zones Act, 19 of 1988 (as amended)

     in respect of the building or structure or the capital improvements made to the building or structure, no wear and tear allowance will be granted.

  3. Intangibles

     Expenditure on acquiring patent rights, trademarks, and goodwill must be capitalized. Only manufacturing companies subject to the provisions of the Income tax (In Aid of Industry) Act, Chapter 85:04 (as amended), may depreciate such expenditure for tax purposes. Research and development expenditure is deductible in the year in which it is incurred, although very substantial expenditures may be written off over a longer period.

  4. Balancing Allowance or Charge

     If an asset that qualified for tax wear and tear allowances is sold at a price less than its tax written-down value , a balancing allowance is deductible equal to the deficiency. Conversely, if disposal proceeds exceed the tax written-down value, the excess (called a balancing charge), up to the amount of the tax depreciation allowances previously deducted, is taxed as part of the profit for the year. Where machinery and equipment is replaced, a balancing charge arising on the sale of the original assets may be deducted from the tax-depreciable cost of the replacement assets instead of being taxed in the year in which it arises. No balancing charge may be deemed to arise on the disposal of an industrial building if it has been used for more than 50 years.

  
  
  

• c. Training allowance

  In computing the chargeable profits of a company for the purposes of corporation tax, a company shall be allowed expenses reasonably incurred in the training and retraining of employees of the company up to 150% of such expenditure under Section 10E of the Corporation Tax Act, Chapter 75:02. That is to say, if a company expends $1,000 in the training or retraining if its employees, it can receive up to $1,500 in allowances. 

  Application Procedure

  Companies can apply for the aforementioned allowances via the Corporation Tax Return form when filing their tax returns with the Inland Revenue Division (IRD).  This form must be submitted to the IRD by the 30th April of each year, in respect of income for the preceding year. New Companies are required to apply for a file number on the prescribed form, obtainable at the Division. This number is to be used on all correspondence with the Board and must be quoted on remittances.

  
  
  

• d. Tax Allowances for Creative Sector Sponsorship

  Sections 10G(1), 10I(1), 10J(1), 10K(1), 10L(1) and 10Q(1) of the Corporation Tax Act provide for tax allowances relating to the sponsorship of arts and culture, sporting activities or events, audio, visual or video productions, production companies and the fashion industry up to TT$12,000,000.

  These allowances can be 100% or 150% of the actual expenditure and shall be treated as deductions when ascertaining the chargeable profits of the company for that year of income.

  For more details, including the particular allowances of the various expenditures, refer to the Corporation Tax Act, Chapter 75:02

  Responsible Agency/Contact Person

  Inland Revenue Division
  Government Campus Plaza, 2-4 Ajax Street, Port of Spain

  Mr. Dabie Dookharan, Supervisor Taxpayers Services
  Tel: (868) 800-8299 ext. 10436
  Email: ddookharan@ird.gov.tt
  Web: www.ird.gov.tt