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Income Tax Act, 1962 (Act 58 of 1962)

Regulations made under Section 12I of the Income Tax Act, 1962

5. Brownfield projects - Factors and point allocation

 

 

Innovative processes

 

5.1 For the purposes of section 12I(8)(a)(i) and 12I(10) (a), a brownfield project is regarded as upgrading an industry within the Republic by utilising innovative processes where the Minister of Trade and Industry, after taking into consideration the recommendations of the adjudication committee, is satisfied that—
(a) the project will utilise processes of innovation, thereby changing pre-existing techniques and the use of plant, machinery or equipment; and
(b) these processes will materially improve production time, reduce production costs, improve product quality or improve product longevity.

(1 point)

 

Improved energy efficiency with emphasis on cleaner production technology

 

5.2 For the purposes of sections 12I(8)(a)(ii) and 12I(10)(g), a brownfield project will be regarded as upgrading an industry within the Republic by utilising new technology that results in improved energy efficiency and cleaner production technology where the Minister of Trade and Industry, after taking into consideration the recommendations of the adjudication committee, is satisfied that—
(a) the manufacturing assets of the project will attain an energy efficiency improvement of at least 12,5 per cent (but less than 15 per cent) relative to the baseline, determined for the 12 month period prior to the application as certified by the South African National Energy Development Institute by the end of the additional investment allowance benefit period; or

(1 point) or

(b) the manufacturing assets of the project will attain an energy efficiency improvement of at least 15 per cent relative to the baseline, as determined for the 12 month period prior to the application, as certified by the South African National Energy Development Institute by the end of the additional investment allowance benefit period.

(2 points)

 

General business linkages

 

5.3 For the purposes of sections 12I(8)(b) and 12I(10)(b), a brownfield project is regarded as providing general business linkages within the Republic where the Minister of Trade and Industry, after taking into account the recommendations of the adjudication committee, is satisfied that—
(a) the project will be engaged in the production of goods, where less than 40% of the local demand for such goods are produced in the Republic or where these goods were not previously produced in the Republic; or
(b) the project will contribute to the global competitiveness of an industrial sector by the production of goods where identical or similar goods would not be produced in the Republic without substantial capital investment.

(1 point)

 

Acquiring goods and services from small, medium or micro enterprises

 

5.4 For the purposes of sections 12I(8)(c) and12I(10)(c), a brownfield project will be regarded as acquiring goods and services from small, medium or micro enterprises where the Minister of Trade and Industry, after taking into account the recommendations of the adjudication committee, is satisfied that the project will acquire:

(a)        at least 10 per cent; or

(1 point) or

(b)        at least 15 per cent,

(2 points)

of its raw materials, intermediate products and services, based on the annual cost to the industrial project (including direct and indirect operating costs) from enterprises which at the time of acquisition of the goods and services, are small, medium and micro enterprises (excluding any small, medium or micro enterprise which is a connected person, as defined in section 1 of the Act, in relation to the company carrying on that industrial policy project) during the additional investment allowance benefit period.

[Subregulation 5.4 amended by section 5(a) of Notice No. R. 633 of 2012]

 

Direct employment creation

 

5.5 For the purposes of Sections 12I(8)(d) and 12I(10)(d), a brownfield project is regarded as creating direct employment within the Republic where the Minister of Trade and Industry, after taking into account the recommendations of the adjudication committee, is satisfied that the project will by the end of the additional investment allowance benefit period create at least—
(a) 0,5 full-time jobs (but less than 1 full-time job); or

(1 point) or

(b)        1 full-time job,

(2 points)

for each R1 million of cost of manufacturing assets in respect of the project (not taking into account amounts above R1 billion).

 

Skills development

 

5.6 For the purposes of sections 12I(8(e) and 12I(10)(e), a brownfield project is regarded as providing skills development within the Republic, where the Minister of Trade and Industry after taking into account the recommendations of the adjudication committee, is satisfied that the cost of training in respect of the project will exceed as a percentage of the wage bill, over the additional training allowance benefit period—

(a)        more than 2 per cent of the annual average, but less than 2,5 per cent; or

(1 point) or

(b)        2,5 per cent or more of the annual average.

[Paragraph (b) amended by section 5(b) of Notice No. R. 633 of 2012]

(2 points)