12E.     Deductions in respect of small business corporations

(1)     Where any plant or machinery (hereinafter referred to as an asset) owned by a taxpayer which qualifies as a small business corporation or acquired by such a taxpayer as purchaser in terms of an agreement contemplated in paragraph (a) of the definition of ‘instalment credit agreement’ in section 1 of the Value-Added Tax Act-

[Words preceding paragraph (a) substituted by section 35 of Act 31 of 2013 effective 12 December 2013]

(a)     is brought into use for the first time by that taxpayer on or after 1 April 2001 for the purpose of that taxpayer’s trade (other than mining or farming); and

(b)     is used by that taxpayer directly in a process of manufacture (or any other process which is of a similar nature) carried on by that taxpayer, a deduction equal to the cost of such asset shall be allowed in the year that such asset is so brought into use.

[Subsection (1) amended by section 21 of Act 31 of 2005 and substituted by section 21 of Act 25 of 2015 effective on 8 January 2016]

(1A)  Subject to subsection (1). where any machinery, plant, implement, utensil, article, aircraft or ship in respect of which a deduction is allowable under section 11(e) (‘the asset’) is acquired by a small business corporation under an agreement formally and finally signed by every party to the agreement on or after 1 April 2005, the amount allowed to be deducted in respect of the asset must, at the election of the small business corporation and subject to the provisions of that section, be either-

(a)     the amount allowable in terms of and subject to that section; or

(b)     an amount equal to 50 per cent of the cost of the asset in the year of assessment during which it was first brought into use, 30 per cent in the first succeeding year and 20 per cent in the second succeeding year.

(2)     For purposes of this section the cost to a taxpayer of any asset shall be deemed to be the lesser of the actual cost to the taxpayer to acquire that asset or the cost which a person would, if he had acquired the said asset under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition of the asset was in fact concluded, have incurred in respect of the direct cost of acquisition of the asset, including the direct cost of the installation or erection thereof.

[Subsection (2) substituted by section 21 of Act 31 of 2005 and section 26 of Act 17 of 2017 effective on 18 December 2017]

(3)     Any expenditure (other than expenditure referred to in section 11(a)) incurred by a taxpayer during any year of assessment in moving an asset in respect of which a deduction was allowed or is allowable under this section from one location to another must –

(a)     where the taxpayer is or was entitled to a deduction in respect of that asset under subsection (1A) in that year and one or more succeeding years, be allowed to be deducted from his or her income in equal instalments in that year and each succeeding year in which that deduction is allowable; or

(b)     in any other case, be allowed to be deducted from that taxpayer’s income in that year.

(3B)   No deduction shall be allowed under this section in respect of any asset in respect of which an allowance has been granted to the taxpayer under section 12BA.

[Subsection (3B) inserted by section 17(1) of Act 17 of 2023 effective on 1 March, 2023 and applicable in respect of assets brought into use on or after that date]