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Income Tax Act, 1962 (Act 58 of 1962)

Tax Holiday Regulations

6. Project deemed not to be substantially the same

 

 

A project to be carried on by a company is regarded as not substantially the same manufacturing concern as was carried on by any other person within the Republic, if—

a) such company takes over the whole of such manufacturing concern from such other person with the purpose of expanding such manufacturing concern to such an extent that it will be operated on such a scale which will make it internationally competitive; and—
i) with regard to the scale and scope of such project—
aa) the total investment by such company in machinery and plant of such project, exceeds the cost price—
A) of the machinery and plant to be so taken over from such other person by such company, by at least two times; and
B) at which such machinery and plant to be so taken over was originally acquired by such other person by at least three times; and
bb) the realistically estimated annual turnover as substantiated by a clearly defined marketing report of such project exceeds the total annual turnover of the manufacturing concern to be so taken over by at least two times;
ii) with regard to the extent of the utilisation of—
aa) machinery and plant, not more than 40 per cent of the intended production, as substantiated by a clearly defined production plan of such project, will be derived from the machinery and plant of the manufacturing concern that is to be so taken over; and
bb) human resources, the employees of the manufacturing concern that is to be taken over are retrained in that project to apply the technology of the project as substantiated in a training plan for such project; and
iii) the approval and envisaged implementation of the project will not, as evaluated on the date it is considered by the Board, lead to the eroding of the existing national normal tax base; or
b) machinery and plant [including such assets held under a financial lease, but excluding machinery and plant referred to in paragraph (all are taken over by such company from the manufacturing concern of such other person, and—
i) an investment at cost equivalent to two times the cost of the machinery and plant, or capitalised value of such assets held under financial lease, taken over from the manufacturing concern of such other person is made by such company in additional machinery and plant; and
ii) the machinery and plant is not acquired or leased directly or indirectly from a connected person in relation to such company.