State to Offer Tax Cuts For Special Zone Companies
08 July 2013
Posted by: Author: Linda Ensor
Author: Linda Ensor (BusinessDay, bdlive.co.za)
Companies operating in special economic zones which undertake specific qualifying activities, will benefit from a 15% company tax rate — 46% lower than the prevailing rate of 28%.
An employment incentive will also be offered to all employers in the zones who employ low-salaried staff (those earning below R60,000 a year) regardless of their age.
These incentives are provided for in the draft Taxation Laws Amendment Bill released by the Treasury last week for public comment by August 5.
The Department of Trade and Industry will decide on the qualifying criteria for companies to enter a special economic zone. All companies that meet the requirements will be eligible for an employment tax incentive, an accelerated allowance on capital structures and VAT and customs relief.
Democratic Alliance finance spokesman Tim Harris welcomed the introduction of the "bolder" tax incentives for companies investing in special zones. "For far too long South Africa’s industrial development zones have not provided strong enough incentives for South Africa to compete with similar zones around the world — these concessions by the Treasury will go some way to get us into the game."
Mr Harris stressed, however, that a broad range of zones should be allowed, and not only those based on capital-intensive heavy industry.
Manufacturing Circle executive director Coenraad Bezuidenhout also welcomed the additional concessions but said the same benefits should be extended to established manufacturers which fell outside of the special zones but which nevertheless met the criteria.
The decision to beef up the incentives for special economic zones was based on the department’s realisation that the lack of targeted tax incentives hindered the success of industrial development zones.
The draft bill provides that the effectiveness of the incentives will be reviewed after a period of 10 years, in 2024, with an interim review taking place after five years, in 2019.