PART I

FUNDAMENTAL PRINCIPLES OF THE LOCAL TAXATION SYSTEM

Assessable Income
Under the Income Tax Act the Assessable Income (that is the total income that
is subject to the tax) of any person is derived from various sources that
include:
Business;
Employment;
Rental and royalties; and
Annuities or other periodic payments including receipts by way of
alimony or maintenance.
It is important to note that apart from listing the various sources of income
that are taxable, the act also speaks to any other gains or profits accrued to that
person which are not included under any other paragraph of [this section].
Effectively this section will capture any source of income not identified in the
list given in the act.
Business Income
The amount to be reported is the gains or profits derived from the business in
so far as the income was derived from that source. In the Income Tax Act
business means any business, profession, trade, venture or undertaking and
includes the provision of personal services or technical and managerial skills and
any adventure or concern in the nature of trade but does not include any
employment
In determining the assessable income of any person who derives income from a
business the value of trading stock held at the beginning and end of the year is
taken into account. For the purposes of the act business income includes the
following:
Compensation under an insurance policy for loss of profits or
compensation or damage for loss of profits. For example if there is a fire
and stoked is damaged; the insurance receipt must be included as
income; and
Bad debts recovered that was previously allowed as a deduction.
Employment Income
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This is widely defined under the act and includes amounts accrued by way of
wages, salary, leave pay fee (including directors fees), commission, bonus or
gratuity. In the case of gratuity it will not be included where the amount
accrued represents the final gratuity due from the employer.
Also included is the benefit derived through rents paid by employers on behalf
of their employees as well as the rental value of quarters or residence provided
by the employer.
The meaning of employment income is defined as well to include the value of
any other benefit or advantage received or enjoyed by the employee in respect of
his employment. This would for example include the advantage of a loan
granted at staff rate in a financial institution. It will also include the portion
of the premium on medical insurance policies paid for by employers on behalf
of their employees.
Deductions Allowable
In general the deductions which are allowed under that act are for those
expenses that were wholly, exclusively and in the case of employment income
necessarily incurred to produce the income. As such any case of duality of
purpose will be apportioned; typically through agreement between the taxpayer
and Inland Revenue.
The act also provides that specific deductions will be allowed. These include
capital expenditure (based on the cost of assets used in the business), repairs
(but only to the extent that the repair was not of a capital nature) and legal
expenses that are related to the operational aspects of the business.
Where a loss was incurred the amount can be carried forward for four years or
until the loss is fully allowed, whichever is the earlier.
Expenditure that was not incurred to produce income, and that of a private or
domestic nature is however not allowable under the act.
Mortgage Interest
This deduction is allowed where a resident individual has acquired or made
improvements to owner occupied residential property. Therefore key to being
able to successfully claim this deduction is that:
The property must be owned by the person making the claim ownership
is determined by reference to the name(s) on the Certificate of Title; and
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The individual making the claim must occupy the property for residential
purposes.

Despite this where a husband writes to the Comptroller requesting that his wife
(whose name is not on the Certificate of Title) be allowed to claim a portion or
all of the interest paid, this is allowed. The same applies if the situation were
reversed.
Note that the maximum amount allowable in any one year is fifteen thousand
($15,000) and can claimed in whatever percentage the parties decide (where
more than one individual is making the claim).

Student Loan Interest

A deduction in that regard will be allowed where a student or a benefactor on
behalf of a student has contracted to pay and pay paid interest on a loan for the
purpose of tertiary education. To qualify evidence of being enrolled or having
completed the course of study must be provided.
In cases where the student is pursing studies the benefactor who has
contracted and is paying the interest on the loan is allowed to claim. Upon
completion studies the graduate can claim the interest once he/she has
contracted to and is paying the interest.
In cases where the student has completed studies they must be resident and
domiciled in Dominica to benefit from this deduction. Accordingly, where a
parent was claiming a receiving the deduction for her son who attended
university overseas, receipt of the deduction will cease where, upon completion
of his studies, her son does not return to Dominica.
Donations to Approved Charities
These can be claimed in respect of contributions or donations made to the
Education Trust Fund, the National Development Foundation of Dominica, and
to the Community Hostels Incorporated among others. Contributions or
donations made to any charitable institution designated by Order of Cabinet an
approved charity can also be claimed. The most recent amendment to the
relevant section of the act was in 2007 where some of the approved charities
include:
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The Apha Centre;

The Dominica Infirmary;
REACH;
Grotto Home; and
Go Girls Incorporated

In addition to the deductions referred to above, credit will be given for PAYE
deductions made by the employer and for tax paid in a foreign jurisdiction. In
the case of dividends earned in resident companies, a tax credit to a
maximum of thirty per cent is also allowed.

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