A range of tax incentives are available to companies locating in certain SEZs, subject to specific criteria. Incentives that companies may qualify for include VAT and customs relief, if located within a Customs-
Controlled Area (CCA), an employment tax incentive, building allowances, and reduced corporate income tax rates.
VAT and customs relief
Businesses located within a CCA will qualify for VAT and customs relief.
They may be eligible for:
- an import duty rebate and VAT exemption on imports of production-related raw materials, including machinery and assets, to be used in production with the aim of exporting the finished products;
- a VAT suspension under specific conditions for supplies procured in South Africa; and
- efficient and expedited customs administration.
More information on CCAs can be found on the SARS website www.sars.gov.za
Employment tax incentive
An employment tax incentive will be available to businesses located in any SEZ.
To encourage employers to hire younger and less experienced work seekers, employers of low-salaried employees (below R60 000 per annum) in any SEZ will be entitled to the employment tax incentive (ETI).
The employment tax incentive helps reduce the employers cost of hiring young people through a cost-sharing mechanism with government. It allows employers to reduce the amount of Pay-As-You-Earn (PAYE) they pay, while leaving the wage received by the employee unaffected.
Employers will be able to claim the incentive for a 24 qualifying month period for all employees who qualify.
No age limits are applicable if the employee renders services inside an SEZ to an employer that is operating inside the SEZ.
Businesses operating within approved SEZs are eligible for an accelerated depreciation allowance on capital structures (buildings).
The special rate of capital (depreciation) allowances in lieu of normal allowances will be available for erecting or improving buildings and other fixed structures. This rate will equal 10% per annum over 10 years.
Reduced corporate income tax rate
Certain businesses operating within approved SEZs will also be eligible for a reduced corporate tax rate of 15% provided they are undertaking certain qualifying activities. This is much lower than the headline rate of 28%.
Qualifying criteria include:
- The company must be located in an approved SEZ;
- It must be incorporated or effectively managed in South Africa;
- At least 90% of the income must be derived from the carrying on of business or provision of services within that SEZ; and
The company must not be engaged in activities listed in the Government Gazette No. 39930. http://www.thedtic.gov.za/wp-content/uploads/SEZ_Excluded_Activities.pdf