The 12I Tax Incentive is designed to support Greenfield investments (i.e. new industrial projects that utilise only new and unused manufacturing assets), as well as Brownfield investments (i.e. expansions or upgrades of existing industrial projects). The incentive offers support for both capital investment and training.
NOTE: The window period for receiving applications under this programme has been extended initially from 31 December 2015 to 31 December 2017 and subsequently to 31 March 2020.
The objectives of the incentive programme are to support the following:
Investment in manufacturing assets, to improve the productivity of the South African manufacturing sector; and
Training of personnel, to improve labour productivity and the skills profile of the labour force.
(a) Investment Allowance
55% of Qualifying Assets or a maximum of R900 million investment allowance in the case of any Greenfield project with a preferred status (100% if located in a Special Economic Zone or “SEZ”)
35% of Qualifying Assets or a maximum R550 million investment allowance in the case of any other Greenfield project (75% if located in a Special Economic Zone or “SEZ”);
55% of Qualifying Assets or a maximum of R550 million investment allowance in the case of any Brownfield project with a preferred status;
35% of Qualifying Assets or a maximum of R350 million investment allowance in the case of any other Brownfield project.
Qualifying Assets are defined as new and unused buildings and new and unused plant & machinery contracted for and acquired after date of approval and brought into use within 4 years from date of approval (implementation period).
The Investment Allowance may be deducted from taxable income in the financial year when assets are brought into use (start of production).
Compliance period is the period during which the company must comply with all the approved criteria and is defined as the period commencing at the beginning of the year of assessment (financial year) following the year of assessment in which assets are first brought into use and ending at the end of the year of assessment (financial year) three years after the year of assessment in which assets are first brought into use. The Compliance Period is therefore three full financial years after the year in which assets are brought into use.
Progress reports in the prescribed format must, in terms of section 12I(11), be submitted within 12 months after the financial year covered by the report and must be submitted annually thereafter until the end of the Compliance Period. The first Progress Report must cover the financial year during which approval is granted.
(b) Training Allowance
An additional training allowance of the lesser of R36 000 per full time employee or total training expenses may be deducted from taxable income for every financial year after the date of approval of the application (but not earlier than the financial year prior to the year during which assets are brought into use) until the end of the compliance period.
A maximum total additional training allowance per project, amounting to R20 million, in the case of a qualifying project, and R30 million in the case of a preferred project is applicable.
According to the point system, an Industrial Policy project will achieve 'qualifying status' if it achieves at least 4 (four) of the total 8 points, and 'preferred status' if it achieves at least 7 (seven) of the total 8 points
The investment must be:
Greenfield project (new project). A minimum investment in Qualifying Assets of R50 million is required; or
Brownfield project (expansion or upgrade). A minimum additional investment in Qualifying Assets of R30 million is required; and
Classified under, “Section C: Manufacturing” in version 7 of the Standard Industrial Classification Code (“SIC Code”)
The project should:
Upgrade an industry within South Africa (via an innovative process, cleaner production technology);
Utilising new technology that results in improved Energy Efficiency;
Provide general business linkages within South Africa;
Acquire goods and services from small, medium and micro-sized enterprises (SMMEs);