South Africa: Proposed extensions of tax incentives

The amendments are proposed to have an effective date of 1 January 2020.

The amendments are proposed to have an effective date of 1 January 2020.

The Draft Taxation Laws Amendment Bill for 2021 includes proposals to amend the “learnership agreement” tax incentive under section 12H and the manufacturing tax allowance under section 12I of the Income Tax Act 58 of 1962 (the Act).

These amendments are proposed to have an effective date of 1 January 2020.

  • The proposed amendments to section 12H would extend this tax incentive for two years (meaning it would apply to learnerships entered into before 1 April 2024).
  • Section 12I—intended to support investment in manufacturing assets that improve the productivity of the manufacturing sector—was scheduled to sunset 31 March 2020, but industrial-policy projects approved before 31 March 2020 continue to be entitled to the section 12I benefits. The draft bill proposes:
    • An extension of the time period by which assets must be brought into use by no more than an additional two years (this is in addition to the one-year extension currently allowed to be provided)
    • An extension of the “compliance period” within which approved projects must fully comply by no more than two additional years

KPMG observation

These proposed extensions are not intended to provide blanket relief to all approved projects. Companies with projects fundamentally affected by the coronavirus (COVID-19) pandemic or related circumstances need to consider applying for the extension relief measures to the section 12I adjudication committee which would assess these projects on a case-by-case basis.

The draft bill is currently open for comment. Once all consultations have been concluded, it appears that the final bill could be published in October 2021, with enactment expected in December 2021 or January 2022.

Read an August 2021 report [PDF 218 KB] prepared by the KPMG member firm in South Africa


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