government's industrial policy strategy, an additional investment allowance and
additional training allowance for certain manufacturing sectors
10 March 2009
The National Treasury today releases for public comment draft regulations
relating to tax incentives, as announced by the Minister of Finance in the 2008
budget, in support of governmentâs industrial policy strategy.
The draft regulations define the pre-requirements for an industrial policy
project to qualify for the tax incentives and the point scoring system
applicable to Brownfield (expansions) and Greenfield (new) projects.
Prerequisites include energy efficiency, skills development and investment size
requirements. A project may not benefit from this incentive if it receives
other concurrent benefits (e.g. the enterprise investment programme).
According to the point system, an industrial policy project will achieve
qualifying status if it achieves at least five out of a total of ten points and
a preferred status if it achieves at least eight out of a total of ten points.
Qualifying status projects may deduct from its taxable income an additional 35
percent of the costs of the investment in manufacturing assets, up to a maximum
of R550 million. Preferred status projects may deduct and additional 55 percent
of the cost of the investment in manufacturing assets, up to a maximum of R900
million.
See the annexure for further details on the pre-requisites and point
system.
Deadline for comments
The deadline for public comments is Tuesday 31 March 2009. No late comments
will be considered. The draft regulations are available on http://www.treasury.gov.za and comments should
be sent to marle.vanniekerk@treasury.gov.za
Annexure
Prerequisites for industrial policy projects
Energy efficiency
In the case of a Brownfield project, the project must attain an energy
efficiency improvement of a least ten percent from a 2006 baseline. In the case
of Greenfield projects, a project must utilise the most modern energy-efficient
equipment and processes.
Skills development
The project/company must incur expenditure on training that is at least
equal to two percent of its annual wage bill and which will result in the
upgrading of skills.
Size of the investment
R200 million in the case of a Greenfield project and in the case of
Brownfield projects R30 million or the lesser of R200 million or 25 percent of
the value of existing assets.
Point system
An industrial policy project will achieve qualifying status if it achieves
at least five out of a total of ten points and a preferred status if it
achieves at least eight out of a total of ten points.
A project that achieves a qualifying status (between five and seven points)
may deduct from its taxable income an additional 35 percent of the costs of the
investment in manufacturing assets, up to a maximum of R550 million. A project
that achieves a preferred status (between eight and ten points) may deduct and
additional 55 percent of the cost of the investment in manufacturing assets, up
to a maximum of R900 million.
An additional training allowance of R36 000 per employee may be deducted
from taxable income. The maximum total additional training allowance per
project is R20 million in the case of a qualifying project and R30 million in
the case of a preferred project.
Brownfield projects
A project may score one or more points for each of the following
activities:
* innovative processes (one)
* improved energy efficiency (two)
* business linkages (one)
* purchases from small and medium size businesses (two)
* direct employment creation (two)
* skills development (two).
Greenfield projects
A project may score one or more points for each of the following
activities:
* innovative processes (one)
* improved energy efficiency (two)
* business linkages (one)
* purchases from small and medium size businesses (one)
* direct employment creation (two)
* skills development (two)
* location in an industrial development zone (one).
For more information contact:
Thoraya Pandy
Tel: 012 315 5944
Cell: 082 416 8416
Issued by: National Treasury
10 March 2009
