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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II: The Taxes

Part I: Normal Tax

12R. Special economic zones

 

(1)        For the purposes of this section—

 

"qualifying company"

means a company—

(a)

(i) incorporated by or under any law in force in the Republic or in any part thereof; or
(ii) that has its place of effective management in the Republic;
(b) that carries on business in a special economic zone designated by the Minister of Trade and Industry in terms of the Special Economic Zones Act and approved by the Minister of Finance after consultation with the Minister of Trade and Industry for the purposes of subsection (2) by notice in the Gazette;

[Paragraph (b) amended by section 26(1)(b) of Act No. 43 of 2014]

(c) if the business or services contemplated in paragraph (b) are carried on or provided from a fixed place of business situated within a special economic zone; and
(d) if not less than 90 per cent of the income of that company is derived from the carrying on of business or provision of services within one or more special economic zones;

[Paragraph (d) amended by section 26(1)(c) of Act No. 43 of 2014]

 

"SIC Code"

means version 7 of the Standard Industrial Classification Code issued by Statistics South Africa;

[Definition inserted by section 26(1)(a) of Act No. 43 of 2014]

 

"special economic zone"

means a special economic zone as defined in the Special Economic Zones Act that is approved for the purposes of this section by the Minister of Finance under subsection (3);

 

"Special Economic Zones Act’"

means the Special Economic Zones Act, 2014 (Act No. 16 of 2014).

[Definition amended by section 26(1)(d) of Act No. 43 of 2014]

 

(2) [Subsection (2) deleted by section 34(a) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]

 

(3) The Minister of Finance must approve a special economic zone for purposes of this section after taking into account the financial implications for the State should a special economic zone be approved under this section.

 

(4) Notwithstanding a qualifying company being located in a special economic zone—
(a) a company is not a qualifying company if that company conducts any of the following activities classified under Section C: Manufacturing’ in the SIC Code;

[Words preceding subsection (4)(b)(i) substituted by section 34(b) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]

(i) Distilling, rectifying and blending of spirits (SIC Code 1101);
(ii) Manufacture of wines (SIC Code 1102);
(iii) Manufacture of malt liquors and malt (SIC Code 103);
(iv) Manufacture of tobacco products (SIC Code 12);
(v) Manufacture of weapons and ammunition (SIC Code 252);
(vi) Manufacture of bio-fuels if that manufacture negatively impacts on food security in the Republic; and

[Subsection (4)(a) amended by section 26(1)(f) and (g) of Act No. 43 of 2014]

(b) a company that conducts any activity classified in the SIC Code, which the Minister of Finance may designate by notice in the Gazette is not a qualifying company; or

[Paragraph (b) amended by section 26(1)h) of Act No. 43 of 2014]

(c) a company is not a qualifying company if —

[Words preceding subsection (4)(c)(i) substituted by section 34(d) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]

(i) more than 20 per cent of expenditure that is deductible under this Act is incurred; or
(ii) more than 20 per cent of the income of that company is received or accrued,

in respect of transactions with any connected person in relation to that company if that connected person—

(aa) is a resident; or
(bb) is not a resident and those transactions are attributable to a permanent establishment of that connected person in the Republic.

[Subsection (4)(c) inserted by section 28(1)(c) of Act No. 25 of 2015]

 

(5) This provision ceases to apply in respect of any year of assessment commencing the later of—
(a) on or after 1 January 2024; or
(b) 10 years after the commencement of the carrying on of business in a special economic zone.

[Subsection 5 amended by section 26(1)(i) of Act No. 43 of 2014]

 

[Section 12R to be commenced]