South Africa Introduces New Manufacturing Tax Incentives

by Lorys Charalambous, Tax-News.com, Cyprus

11 November 2010

The South African government has launched a ZAR20bn (USD2.9bn) tax incentive programme to improve the productivity of the country’s manufacturing sector, by supporting investments in new assets and the training provided to employees.

The Industrial Policy Project (IPP) tax allowance programme will comprise two components – an investment allowance of up to a maximum of ZAR900m and a training allowance of up to ZAR30m – to encourage energy efficiency, job creation and industrial skills enhancement.

The tax incentive programme was launched in Pretoria by the Minister of Trade and Industry, Rob Davies. When announcing the programme, he stated that: "What we're doing today is providing allowances which will be measured in terms of the maximum, which will be deductable from the tax obligations of companies that qualify, which will be about ZAR20bn."

It was said that the new IPP allowances replace the Strategic Industrial Projects (SIP) scheme which was launched by the government to attract private sector investment. The SIP resulted in the creation of 6,600 jobs. Davies said that, while these were "quite significant results", more needed to be done on a larger scale.

The IPP incentive, which will run until December 31, 2015, offers ZAR900m for new industrial projects that use new and unused manufacturing assets (greenfield investments) as well as ZAR550m for the expansion or upgrades of existing projects (brownfield investments).

Companies going green by saving energy, and projects creating direct employment in the country, are amongst the criteria to receive the tax relief. It is, however, reported that the tobacco, alcoholic beverages and arms and ammunition sectors are excluded from the scheme.

Recommended