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6.3. Depreciation and Amortization

When calculating Barbados taxable income, capital allowances may be claimed while accounting depreciation and amortization of assets is disallowed. Capital allowances typically come in the form of initial allowances and annual allowances computed on a straight-line basis, as well as investment allowances. Unlike initial allowances, investment allowances are not deducted in determining the diminished value of the asset.

The following outlines the asset types and general capital allowance rates.

Immovable Property

An initial allowance of 40% is granted in the year of expenditure for industrial buildings, with an annual allowance of 4% until written off.

Commercial buildings are eligible for a 10% allowance on the improved value of the building if registered with the National Trust, while those that are not registered receive a 1% allowance.

Buildings converted to residential units for rental are granted a 40% initial allowance on the expenditure incurred for conversion, and a 4% annual allowance.

Effective from 1 January 2019, the initial allowances have been removed, and only the annual allowances will apply.

Plant & Machinery

An initial allowance of 20% is granted in the year of expenditure for plant and machinery, with annual allowances ranging from 5% to 33 1/3% until written off.

Expenditure on new or imported plant & machinery qualifies for investment allowance instead of initial allowances. Qualifying industries including sugar refining, clay or limestone product manufacture, and other basic industries as defined by the tax authorities receive a 40% investment allowance while others receive a 20% investment allowance.

Companies which qualify for export allowances (generally those exporting outside the Caribbean Community) can also qualify for a 40% investment allowance for expenditure on new or imported plant & machinery.

An additional manufacturing allowance of 50% is provided for plant & machinery used in manufacturing, resulting in an effective 150% total allowance.

Effective from 1 January 2019, the initial allowances have been removed, and only the annual allowances will apply.

Intangible Assets

An annual allowance of 100% is granted with respect to capital expenditure on software.

50% of expenditure on intellectual property was deductible over a 10-year period until 1 January 2019.

Energy Conservation and Renewable Energy

A 50% allowance is provided for the cost of retrofitting premises or installing systems to produce electricity from alternative sources.