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Income Tax Act, 1962 (Act 58 of 1962)

Chapter II: The Taxes

Part I: Normal Tax

12S. Deduction in respect of buildings in special economic zones

 

(1)        For the purposes of this section,

 

‘qualifying company’

means a qualifying company as defined in section 12R, notwithstanding section 12R(4).

[Subsection (1) substituted by section 35(a) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]

 

(2) A qualifying company may deduct from the income of that qualifying company an allowance equal to ten per cent of the cost to the qualifying company of any new and unused building owned by the qualifying company, or any new and unused improvement to any building owned by the qualifying company, if that building or improvement is wholly or mainly used by the qualifying company during the year of assessment for purposes of producing income within a special economic zone, as defined in section 12R(1), in the course of the taxpayer’s trade, other than the provision of residential accommodation.

[Subsection 2 amended by section 27(1) of Act No. 43 of 2014]

 

(3) If a qualifying company completes an improvement as contemplated in section 12N, the expenditure incurred by the qualifying company to complete the improvement must be deemed to be the cost to the qualifying company of any new and unused building or of any new and unused improvement to a building contemplated in subsection (2).

 

(4) For the purposes of this section the cost to a qualifying company of any building or improvement must be deemed to be the lesser of the actual cost to the qualifying company or the cost which a person would, if that person had acquired, erected or improved the building under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition, erection or improvement of the building was in fact concluded, have incurred in respect of the direct cost of the acquisition, erection or improvement of the building.

 

(5) No deduction may be allowed under this subsection in respect of any building that has been disposed of by the qualifying company during any previous year of assessment.

 

(6) A deduction may not be allowed under any other section of this Act in respect of the cost of a building or improvement if any of that cost has qualified or will qualify for deduction from the qualifying company’s income as a deduction of expenditure or an allowance in respect of expenditure under this section.

 

(7) The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any building or improvement may not in the aggregate exceed the amount of such cost.

 

(8) The Commissioner may, notwithstanding the provisions of section 99 and 100  of the Tax Administration Act disallow all deductions otherwise provided for under this section if a qualifying company is guilty of fraud or misrepresentation or non-disclosure of material facts with regard to any tax, duty or levy administered by the Commissioner.

[Subsection (8) substituted by section 35(b) of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016)]

 

(9) The Commissioner may, notwithstanding the provisions of sections 99 and 100 of the Tax Administration Act, raise an additional assessment for any year of assessment where a deduction that has been allowed in any previous year must be disallowed in terms of subsection (8).

 

(10) This provision ceases to apply in respect of any year of assessment commencing on or after 1 January 2024.

 

Subsection (1) comes into operation on the date that the Special Economic Zones Act referred to in section 12R of the Income Tax Act, 1962, comes into operation and applies in respect of years of assessment commencing on or after that date.