Tax Update-1998 Budget Issues


It is proposed that in the Finance Bill any levy paid to the Government in the basis year for that year of assessment pursuant to Section 3 of the Fees Act, 1951 for the issue of an Employment Pass, Visit Pass (Temporary Employment) or Work Pass shall be deducted from income tax chargeable for that year of assessment on the individual concerned before any set off in respect of tax deducted at source from dividends, royalty, etc and foreign tax credit.

Where rebate exceeds the tax charged, there will neither be any refund or credit carried forward.

This long awaited proposed legislation is welcome. The said legislation does not address the issue of levies paid in past years. It also does not recognise that levies paid in a year may be in respect of two or more years.

The above proposal is to be effective from year of assessment 1998.
   
  Currently, buildings used solely for the purpose of storage of goods for export or for the storage of imported goods which are to be processed and re-exported are eligible for an Industrial Building Allowance (IBA) involving an initial allowance of 10% and an annual allowance of 2%. It is proposed in the Finance Bill that the IBA rate be amended to 10% per year straight line.

It is also proposed in the Finance Bill that qualifying buildings be extended to include warehouse buildings which are used for the storage of imported goods which are to be processed and distributed.

The above proposals are to be effective from year of assessment 1998.
   
  As a measure to reduce the import of heavy machinery, the Minister of Finance in his Budget Speech has proposed the following amendments in respect of imported heavy machinery used in the building, construction and primary industry (mining, logging and forestry) :-
a. reduction in initial allowance rate from 20% to 10% ; and

b. reduction of annual allowance rate from a range of 12% to 20% to 10%.

In respect of local heavy machinery, the initial allowance is maintained at 20% and annual allowances at a range of 12% to 20%.

The proposal is effective from October 17, 1997.
 

[page 10 of 27]

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