Capital Allowances

(Sections 5, 14, 67 and 81)

                                            Part I: General

Classification and pooling of depreciable assets

(1) Depreciable assets are classified as follows:

(2) A Class 1, 2 or 3 depreciable asset owned and employed by a person during a year of assessment in the production of income from a particular business shall, at the time the asset is first owned and employed by that person, be placed in a pool with all other assets of the same Class owned and employed by that person in the business.

(3) A Class 4 or 5 depreciable asset owned and employed by a person during a year of assessment in the production of income from a particular business shall, at the time the asset is first owned and employed by the person, be placed in a pool of its own separately from other assets of that Class or any other Class.

(4) Where a depreciable asset owned by a person is partly used in the production of income from a business, only that part of the asset which is used in the production of the income shall be placed in the pool of depreciable assets.

(5) Subparagraph (6) applies to expenses incurred by a person wholly, exclusively and necessarily in the production of the income of that person from a business

(a) in respect of planting vegetation from which timber, rubber, oil palm or other crops are derived; and

(b) where the business is a timber concern or a large scale rubber, oil palm or other long term crop plantation.

(6) Unless otherwise provided, an expense referred to in subparagraph

(5) shall be treated as if the expense was incurred in securing the acquisition of a depreciable asset that is used by the person in the production of income.

Depreciation Allowance

2. (1) Subject to this paragraph and with respect to each basis period of a person ending in the year of assessment, the Commissioner-General shall grant an allowance to that person for a year of assessment for each pool of depreciable assets.

(2) The allowance referred to under subparagraph (1) shall be equal to the depreciation for the period of each pool of depreciable assets and computed in accordance with subparagraphs (3) and (6).

(3) Depreciation for a year of assessment for each pool of depreciable assets is computed

(a) in the case of Class 1, 2 and 3 pools, in accordance with the reducing balance method; and

(b) in the case of Class 4 and 5 pools, in accordance with the straight line method.

(4) Depreciation is calculated using the following formula:

                     A x B x C

                          365

where

A is the depreciation basis of the pool of depreciable assets at

the end of the basis period;

B is the depreciation rate applicable to the pool of depreciable assets; and

C is the number of days in the basis period of the person.

(5) The depreciation rates applicable to each pool of depreciable assets referred to in subparagraph (3) are

(6) Where at the end of a year of assessment, the depreciation basis of a pool of depreciable assets, reduced by depreciation calculated under subparagraph (3), produces an amount that is less than five hundred Cedis, additional depreciation of that pool is computed as equal to that amount.

(7) The allowance granted to a person under subparagraph (1) for a year of assessment with respect to a Class 4 or 5 pool of depreciable assets shall not exceed the depreciation basis of the pool at the end of the basis period, reduced by all other allowances granted to the person in any previous basis period in respect of that pool.

Depreciation basis of a pool of depreciable assets

3. (1) The depreciation basis of a pool of depreciable assets at the end of a basis period in respect of a Class 1, 2 or 3 asset is

(a) the total of

(i) the depreciation basis of the pool at the end of the previous basis period, if any, after deducting depreciation for that pool calculated under paragraph

2 for that previous period; and

(ii) amounts added to the depreciation basis of that pool during the basis period in respect of additions to the cost of assets in or added to that pool; and

(b) reduced, but not below zero, by consideration received for the assets in that pool or that have been in the pool during the basis period.

(2) The depreciation basis of a pool of depreciable assets at the end of a basis period in respect of a Class 4 or 5 asset is

(a) the total of

(i) the depreciation basis of that pool at the end of the previous basis period; and

(ii) amounts added to the depreciation basis of that pool during the basis period in respect of additions to the cost of assets in or added to the pool; and

(b) reduced, but not below zero, by the consideration received for the assets in that pool during the basis period.

(3) Where by reason of subparagraph (4) of paragraph 1, only part of an asset is placed in a pool of depreciable assets, the Commissioner-General shall apportion the cost of that asset and the consideration received for that asset according to the market value of the part of the asset which has been included in the pool and the part which is not placed in the pool. [Amended by the Income Tax (Amendment) (No.2) Act, 2016 (Act 924)]

(4) For the purpose of this Schedule, the cost of a road vehicle other than a commercial vehicle, is not recognised to the extent that the cost exceeds seventy-five thousand Cedis.

(5) For the purpose of this paragraph, “commercial vehicle” means

(a) a road vehicle designed to carry a load of more than half a tonne or more than thirteen passengers; or

(b) a vehicle used in a transportation or a vehicle rental business.

Realisation of depreciable assets

4. (1) For the purpose of computing the income of a person for a year of assessment from a business in which a depreciable asset of a particular Class was employed, the Commissioner-General shall include the excess of the following two amounts:

(a) the consideration received by the person during the year for any asset that was in a particular pool of depreciable assets of the person during the year; reduced by

(b) subparagraph (i) or (ii), as appropriate

(i) in the case of a Class 1, 2 or 3 pool of depreciable assets, the depreciation basis of each pool at the end of the year, but disregarding the consideration received referred to in paragraph (a); or

(ii) in the case of a Class 4 or 5 pool, the written down value of the pool at the end of the year calculated under subparagraph (3), but disregarding the consideration received referred to in paragraph (a).

(2) Where the assets in a pool of depreciable assets of a person are all realised by the person before the end of a year of assessment, the person shall dissolve the pool of depreciable assets and

(a) include in the income of that person for the year, an amount that is calculated using the formula A – B; or

(b) be granted an allowance for the year, calculated using the formula B – A;

where

A - is the consideration received by the person during the year of assessment for the asset; and

B - is the sum of

(i) the written down value of that pool of depreciable assets at the end of the previous year of assessment; and

(ii) amounts added to the depreciation basis of that pool of depreciable assets during the year of assessment.

(3) For the purpose of this paragraph, “written down value” of a pool of depreciable assets at the end of a year of assessment means

(a) in the case of a Class 1, 2 or 3 pool of depreciable assets, the depreciation basis of that pool at the end of the year, if any, after deducting depreciation for that pool for the year as calculated under paragraph 2; or

(b) in the case of a Class 4 or 5 pool of depreciable assets, the depreciation basis of that pool at the end of the year reduced by all allowances granted to the person under paragraph 2 in respect of that pool for that year and any previous year.

(4) For the purpose of this paragraph, a person realises a depreciable asset referred to in paragraph 1(5) only if that person sells to another person who is not an associate of the business in respect of which the expense was incurred. [Amended by the Income Tax (Amendment) (No.2) Act, 2016 (Act 924)]

                               Part 2: Petroleum Operations

Modification of Part 1

5. (1) A person who incurs a capital allowance expenditure in respect of a separate petroleum operation during a year of assessment shall place that expenditure in a separate pool of depreciable assets.

(2) The Commissioner-General shall grant to that person a capital allowance with respect to each year at the rate of twenty percent using the straight line method.

(3) Where an asset for which capital allowance expenditure has been incurred under this paragraph is disposed of or treated as disposed of during a year of assessment, the Commissioner-General shall, in computing assessable income from the separate petroleum operation for the year, include consideration received for the disposal.

(4) Where in a year of assessment an asset is partly used in a separate petroleum operation and partly used in another separate petroleum operation the Commissioner-General shall apportion the capital allowance of that asset in that year between the two separate petroleum operations in proportion to the use of the asset in each separate petroleum operation.

(5) Where in a year of assessment a person assigns a petroleum right of that person, the written down value of any capital allowance expenditure of that person at the beginning of that year is transferred to the assignee.

(6) Where in a year of assessment a person assigns part of the petroleum right of that person, the Commissioner-General shall apportion the written down value of the capital allowance expenditure of the person between that person and the assignee in proportion to the percentage of the interest retained and the percentage of the interest assigned.

(7) Where, for the purpose of calculating the income of a person, a deduction is made in respect of capital allowance expenditure, a further deduction shall not be made in respect of the same capital allowance expenditure under any other provision of this Act.

(8) In this paragraph, unless the context otherwise requires,

“capital allowance expenditure” means expenditure for which capital allowances are available under this Schedule, including by reason of Division I of Part VI but subject to section 67; and

“written down value” of an asset means the cost of the asset less all capital allowances granted with respect to expenditure included in that cost.

                                                   Part 3: Minerals and Mining

Modification of Part 1

6. (1) A person who incurs a capital allowance expenditure in respect of a separate mineral operation during a year of assessment shall place that expenditure in a separate pool of depreciable assets.

(2) The Commissioner-General shall grant to that person a capital allowance with respect to each year at the rate of twenty percent using the straight line method.

(3) Where an asset for which capital allowance has been granted under this paragraph is disposed of or treated as disposed of during a year of assessment, the Commissioner-General shall,

(a) if the consideration received for the disposal exceeds the written down value of the asset, include the excess in computing the assessable income of that person from the

separate mineral operation for the year;

(b) if the written down value of the asset exceeds the consideration received for the disposal, grant an additional capital allowance for the year in an amount equal to the excess; and

(c) reduce the pool of depreciable assets referred to in subparagraph (1) by the written down value of the asset.

(4) Where in a year of assessment an asset is partly used in a separate mineral operation and partly used in another separate mineral operation, the Commissioner-General shall apportion the capital allowance of that asset in that year between the two separate mineral operations in proportion to the use of the asset in each separate mineral operation.

(5) Where in a year of assessment a person assigns a mineral right of that person, the written down value of any capital allowance expenditure of that person at the beginning of that year is transferred to the assignee.

(6) Where in a year of assessment a person assigns part of the mineral right of that person, the Commissioner-General shall apportion the written down value of the capital allowance expenditure of the person between that person and the assignee in proportion to the percentage of the interest retained and the percentage of the interest assigned.

(7) Where, for the purpose of calculating the income of a person, a deduction is made in respect of capital allowance expenditure, a further deduction shall not be made in respect of the same capital allowance expenditure under any other provision of this Act.

(8) In this paragraph

“capital allowance expenditure” means expenditure for which capital allowances are available under this Schedule, including by reason of Division II of Part VI but subject to section 75; and

“written down value” of an asset means the cost of the asset less any capital allowances granted with respect to expenditure included in that cost.