Post on 14-Jan-2017
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12-I TAX INCENTIVE
Cobs Pillay
Deputy Director: Green Economy
Investment Promotion and Interdepartmental Clearing House
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• Overview
• Strategic Investment Programme (Sec 12G or SIP)
• 12-I Tax Allowance (Industrial Policy Projects or IPP)
• What was the rationale?
• What are the requirements?
• What are the benefits?
• What is considered to evaluate projects?
• Approval process and monitoring
• Contact details
CONTENTS
OVERVIEW: SEC 12G (SIP)
• Commenced on 01 August 2001 applications closed 31 July 2005
• Programme duration: 5 years
• R3bn tax forgone (R10bn tax allowance)
• SIP has supported 41 projects, 20 projects within chemical sector, 10
projects within metals and 6 projects within the paper and pulp with
total investment of R13 billion.
• These projects created 6600 direct job and 67 000 indirect jobs,
• R340 million has been spent on infrastructure and
• R3 billion worth of small medium and micro enterprise procurement.3
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OVERVIEW- SEC 12I
• Budget speech 2008 R5,6 billion over the next 5 years tax incentives to support industrial policy objectives
• R5.6bn tax foregone
• R20billion aggregate tax allowance
• To accelerate economic growth and to support the industrial policy objectives by:
– Diversify South Africa’s industrial output,
– Support a knowledge-based economy, and
– Nurturing labour intensive industries.
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RATIONALE
MARKET FAILURE
• Low labour productivity due to shortage of skills
• Low capital productivity due to outdated/inefficient capital equipment
• Low investment in manufacturing sector
OBJECTIVES
• Encourage more investment in the manufacturing sector
• Improve investment in skills
• Improve capital stock in manufacturing sector (technology)
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• Greenfield projects with minimum investment of R50m in new & unused assets
• Brownfield projects: Upgrades and Expansion projects with an additionalinvestment of at least R30m or the lesser of R200m or 25% of existing industrialassets (R30m up to R120m existing assets, 25% between R120m – R800m existingassets & a minimum of R200m additional investment required if existing assets areR800m or higher)
• Manufacturing sector (SIC 3), excl tobacco, alcoholic beverages, arms ammunition,etc.
• Projects that result in 10% energy demand reduction in the year that investment isrealised relative to base year for Brownfields (expansions/upgrades) and relative toindustry benchmark energy consumption for Greenfields.
• Projects that spend minimum 2% of wage bill on training
• Tax Allowance (Sec 12I) - (1) Investment allowance (2) Training allowance
REQUIREMENTS
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BENEFITSAdditional Investment Allowance
Status Preferred status
55% of QA or 100% if
in SEZ
Qualifying Status
35% of QA or 75% if in
SEZ
Greenfields Maximum R900m Maximum R550m
Expansions & Upgrades Maximum R550m Maximum R350m
Status Preferred status
Annual Cost
Qualifying Status
Annual Cost
Greenfields & Brownfields Overall maximum R30m Overall maximum R20m
Maximum per employee R36 000 over 6 years R36 000 over 6 years
Additional Training Allowance
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PROJECT EVALUATION
POINT SCORING CRITERIA
• Improved energy efficiency for expansion and upgrading projects
• Impact on downstream and upstream manufacturing sectors (business linkages / import replacement)
• Location in IDZ/SEZs
• Procurement from small business
• Training expenditure
• Cleaner production technology
PROGRAMME DURATION
• Effective from July 2010 & available for 5 years extended until December 2017
Special Economic Zones (SEZS)
• Government has identified Special Economic Zones as a mechanism
that will contribute towards the realisation of its economic growth and
development goals;
• And is committed to support and facilitate the designation, regulation
and development of Special Economic Zones in South Africa;
• Special Economic Zones will be designated in areas to promote
targeted economic activities, supported through special arrangements;
• and support systems including incentives, business support services,
streamlined approval processes and infrastructure.
Special Economic Zones (SEZs) are geographically designated areas of a country set aside for specifically targeted economic activities to promote rapid industrial development.
Zones are supported through special arrangements and support systems to attract and retain targeted industrial investors.
SEZ
Create new employment opportunities
Increase exports of
value added products
Attract FDI, LDI &
Technology
Increase beneficiation & localised
value chains
Improve local socio-
economic conditions
Special Economic Zones
Incentives Strategy
i) 15% Corporate Tax
ii) Building Allowance
iii) Employment Incentive
iv) CCA
v) 12i Tax Allowance
SEZ Value Proposition
SEZ Support Measures
Funding Strategy
i) SEZ Fund
ii) Mix of funding instruments
iii) PPPs
Infrastructure Strategy
i) Bulk infrastructure by government through SEZ Fund
ii) SEZ Locations
iii)Various stakeholders roles in providing infrastructure in and out of zone
Skills & Supplier Development
i) Skills dev. Strategies for SEZs
ii) Supplier development programmes to develop our local businesses
iii) Continuous training of civil servants
OSS Strategy
i) To reduce info search & transaction cost
ii) Facilitate permits & licences for investors
iii) Eliminate steps in approvals
iv) After care
Proposed SEZS In South Africa
Case specific lower corporate tax rate (15 %)
Employment incentive for
low salary workers
Accelerated depreciation for 11 years
Customs controlled area
– VAT exemptions and
duties
12 I tax allowance -
100 % to 75%
All other dtifinancial support
incentives
Dti Funding for all bulk and connecting
infrastructure
Physical links to strategic initiatives
One stop support
services portal (OSS)
Value Proposition
Holistic
industrial
investor
incentives and
support
measures
Support across the supply chain for i.e. tooling engineering supplier development etc.
11 years @ 20 % in first year and 8 % thereafter
Green and brownfield investments of between 100 % and 75 % tax allowance
Incentive Licensee Operator Investor
1. Customs Duties & VAT (in CCA) √ √ √
2. Employment Incentive √ √ √
3. Building Allowance* √ √
4. 15% Corporate Tax* √
5. 12(i) Additional Benefits (points & %) √
6. SEZ Fund for CAPEX (Infrastructure) √ √
* Provided that the Minister of Finance has agreed to allow this benefit to the
SEZ, and that the company is involved in activities that have not been
excluded.
7. SEZ Management support, infrastructure, security, OSS
Summary: Incentives
INCENTIVE SCHEMES
CLUSTER INCENTIVE SCHEME
MANUFACTURING
INVESTMENT
•12i Tax Incentive
• Automotive Incentive Scheme (AIS)
• People-carrier Automotive Investment Scheme (P-AIS)
COMPETITIVENESS
INVESTMENT
•Manufacturing Competitiveness Enhancement Programme
(MCEP)
• Export Marketing & Investment Assistance (EMIA)
•Capital Projects Feasibility Programme (CPFP)
SERVICES
INVESTMENT
•Film & Television Production
• Business Process Services (BPS)
BROADENING
PARTICIPATION
•Black Business Supplier Development
Programme (BBSDP)
• Co-operative Incentive Scheme (CIS)
• Incubator Support Programme (ISP)
INFRASTRUCTURE
INVESTMENT
• Critical Infrastructure Programme (CIP)
POINT SCORING CRITERIA
• Innovation (max. 1 point)
• Improved Energy Efficiency / Cleaner production technology (max. 2 points)
• Business Linkages (import replacement / up & downstream impact (max. 1
point)
• SMME Procurement (Greenfield: max. 1 point Brownfield: max. 2 points)
• Skills Development (training of employees) (max. 2 points)
• Located in an IDZ (Greenfield: max. 1 point Brownfield: N/A)
Qualifying Status: 4, 5 or 6 points Preferred Status: 7 or 8 points
PROGRAMME DURATION
• Effective from July 2010 & available for 7 years until December 2017
PROJECT EVALUATION
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APPROVAL PROCESS
APPLICATIONACCEPTANCE &
DISCUSSION
OF APPLICATION
EVALUATION- CONDUCT SITE VISIT
- PREPARE EVALUATION REPORT
ADJUDICATION
COMMITTEE CONSISTING
OF MEMBERS FROM DTI,
NATIONAL TREASURY
& SARSEVALUATION AND
RECOMMENDATION TO
THE MINISTER FOR
APPROVAL OR REJECTION
MONITORINGANNUAL MONITORING
OF CLIENT DURING BENEFIT
PERIOD OF 4 YEARS
REPORTINGANNUAL REPORTING ON EG. TAX
FORGONE & ECONOMIC GROWTH &
EMPLOYMENT TO:
- PARLIAMENT
- AUDITOR-GENERAL
COMMUNICATION- INFORM CLIENT OF DECISION
- PROVIDE SARS WITH LIST OF APPROVED ALLOWANCES
- PUBLISH LIST OF ADJUDICATED PROJECTS IN GOVERNMENT GAZETTE
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CONTACT DETAILS
André Potgieter: Tel: 012 394 1427
e-mail: andre@thedti.gov.za
Crystal Papier: Tel: 012 394 1069
email: cpapier@thedti.gov.za
Mamaki Ngobeni: Tel: 012 394 1016
email: mngobeni@thedti.gov.za
Website: www.thedti.gov.za
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CIP
Critical Infrastructure Programme ( CIP)
Background:
The CIP aims to enhance investment by supporting critical
infrastructure, thus lowering the costs for investment. It is
available to approved eligible enterprises upon the completion
of the infrastructure project concerned. Infrastructure for which
the funds are required is deemed to bet “ critical” if the
investment would not take place without the said infrastructure
or the said investment would not operate optimally.
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CIP
Objectives of CIP:
The programme is primarily designed to leverage privateinvestment and also promote certain public sector investmentsthat create an enabling environment that leads to private sectorinvestments.
Eligible Enterprises:
Applicant must be a registered legal entity in South Africa
eg: Companies. Private investors and co-operatives.
Benefits:
The CIP offers a grant of a minimum of 10% to the maximum of30% of the total infrastructural development costs, based on thescore achieved in the Economic Benefit Criteria.
The maximum available grant will be capped R30 million perproject
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CIP
THANK YOU