What is the 12I Tax Allowance Incentive?
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. The incentive benefit is an additional tax deduction between 35% and 100% of the cost of qualifying assets, depending on the status and location of the project.
Projects located in a special economic zone with a qualifying or preferred status receive a 75% or 100% tax allowance, respectively. The allowance is limited to either R550 million or R900 million depending on the status. The incentive also provides for a training allowance of 100% of additional deduction on qualifying training expenditure and is limited to R36 000 per full-time employee. The allowance cannot exceed R20 million or R30 million depending on the status of the project.
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.
The minimum investment required in qualifying assets is ZAR 50 million for a greenfield project (projects that use only new and unused manufacturing assets) and an additional investment of ZAR 30 million for a brownfield project (expansions or upgrades of existing industrial complexes). The total investment allowance range between 35% and 55% (or ZAR 350 million and ZAR 900 million) depending on the type of the investment, the status classification, and the localization.
