III. MECHANISMS FOR INTEGRATING ENVIRONMENTAL CONSIDERATIONS INTO AGRICULTURAL POLICY
B. Agricultural incentives
The incentives relevant to the agriculture sector under the Income Tax Act, 1967, are detailed below.2.1. Agricultural allowance
Companies can claim capital allowance or agricultural allowance under schedule 3 of the Income Tax Act, 1967, in respect of certain capital expenditures incurred for purpose of that business. The capital expenditure incurred in carrying out agricultural activities that are eligible for deduction are:
As long as companies incur the above qualifying expenditures they will be granted the allowance, irrespective of whether or not they have been granted pioneer status or ITA. Since pioneer status companies cannot benefit from the allowance during their tax holiday period, the allowance (which falls under the capital expenditure schedule), will be available for deduction against post-pioneer period income. Therefore pioneer status companies may not be liable for income tax payment on business income from agricultural activities over a much longer period.2.2. Deduction for capital expenditure on approved agricultural projects
This incentive is provided under Schedule 4A of the income Tax Act, 1967, which allows persons carrying out an approved agricultural project to elect for the qualifying capital expenditure incurred by them in respect of that project to be deducted from the aggregate income (including income from other sources). Persons who select that option will not be entitled to any capital allowance or agricultural allowance on the same capital expenditure. The qualifying capital expenditures eligible for deduction for the purpose of this incentive are:
An "approved agricultural project" refers to a project approved by the Minister of Finance. Only the qualifying capital expenditure incurred within a specific timeframe and in respect of a farm cultivating and utilizing a specified minimum hectarage for each approved project, as stipulated by the Minister of Finance, will qualify.
This incentive is not given to:
Where there is insufficient aggregate income for the qualifying farm, expenditures to be deducted from the unabsorbed expenditure will be carried forward to subsequent years of assessment.
Applications for the agricultural allowance and deduction for capital expenditures on approved agriculture projects should be submitted to the Department of Inland Revenue.