12K …….
[Section 12K inserted by section 26(1) of Act 17 of 2009, amended by section 37(1) of Act 31 of 2013 and repealed by section 18(1) of Act 34 of 2019 deemed effective on 1 June, 2019]
Author: admin_kmos
Subsections 2, 3, 3A, 4, 5, 6, 6A, 7, 8, 10 and 11 of section 12J of ITA
(2) Subject to subsections (3), (3A), (3B) and (4), there must be allowed as a deduction from the income of a taxpayer in respect of a year of assessment expenditure actually incurred by that taxpayer in acquiring any venture capital share issued to that taxpayer during that year of assessment.
[Subsection (2) substituted by section 38(1)(i) of Act 24 of 2011 and by section 17(1)(b) of Act 34 of 2019]
(3)
(a) Where, during any year of assessment-
(i) any loan or credit has been used by a taxpayer for the payment or financing of the whole or any portion of any expenditure contemplated in subsection (2); and
(ii) any portion of that loan or credit is owed by the taxpayer on the last day of the year of assessment,
the amount which may be taken into account as expenditure that qualifies for a deduction in terms of subsection (2) must be limited to the amount for which the taxpayer is in terms of paragraph (b) deemed to be at risk on the last day of the year of assessment.
(b) For the purposes of paragraph (a), a taxpayer must be deemed to be at risk to the extent that-
(i) the incurral of the expenditure contemplated in subsection (2); or
(ii) the repayment of any loan or credit used by the taxpayer for the payment or financing of any expenditure contemplated in subsection (2),
[Subparagraph (ii) substituted by section 23 of Act 43 of 2014 effective on 1 January 2015]
would (having regard to any transaction, agreement, arrangement, understanding or scheme entered into before or after such expenditure is incurred) result in an economic loss to the taxpayer were no income to be received by or accrue to the taxpayer in future years from the disposal of any venture capital share issued to the taxpayer as a result of the incurral of that expenditure: Provided that the taxpayer must not be deemed to be at risk to the extent that-
(aa) the loan or credit is not repayable within a period of five years from the date on which that loan or credit was advanced to the taxpayer; and
(bb) any loan or credit used by the taxpayer for the payment or financing of the whole or any portion of any expenditure contemplated in subsection (2) is (having regard to any transaction, agreement, arrangement, understanding or scheme entered into before or after such expenditure is incurred) granted directly or indirectly to the taxpayer by the venture capital company by which the qualifying shares are issued as a result of the incurral of that expenditure.
(3A) If, at the end of any year of assessment, after the expiry of a period of 36 months commencing on the first date of the issue of venture capital shares a taxpayer has incurred expenditure as contemplated in subsection (2) and that taxpayer is a connected person in relation to that venture capital company-
(a) no deduction must be allowed in terms of subsection (2) in respect of that year of assessment in respect of any expenditure incurred by the taxpayer in acquiring any venture capital share issued to that taxpayer by that venture capital company;
(b) the Commissioner must, after due notice to the venture capital company, withdraw any approval in terms of subsection (5) with effect from the date of that approval by the Commissioner of that company as a venture capital company in terms of that subsection; and
(c) the Commissioner must withdraw the approval of that company in terms of subsection (5) and an amount equal to 125 per cent of the expenditure incurred by any person to acquire shares issued by the company must be included in the income of the company in the year of assessment in which the approval is withdrawn by the Commissioner,
if corrective steps acceptable to the Commissioner are not taken by the company within a period stated in the notice contemplated in paragraph (b).
[Subsection (3A) inserted by section 38 of Act 24 of 2011 and substituted by section 32 of Act 15 of 2016 effective on 21 July 2019]
(3B) If any taxpayer holds, at the end of any year of assessment following the expiry of a period of 36 months commencing on the first date of the issue by a venture capital company of venture capital shares of any class, more than 20 per cent of the venture capital shares of that class-
(a) no deduction must be allowed in terms of subsection (2) in respect of that year of assessment in respect of any expenditure incurred by the taxpayer in acquiring any venture capital share of that class issued to that taxpayer by that venture capital company;
(b) the Commissioner must, after due notice to the venture capital company, withdraw any approval in terms of subsection (5) with effect from the commencement of that year of assessment; and
(c) an amount equal to 125 per cent of the expenditure incurred by any person to acquire shares issued by the company must be included in the income of the company in the year of assessment in which the approval is withdrawn by the Commissioner under paragraph (b):
Provided that—
(a) this subsection must not apply during any year of assessment where that taxpayer holds more than 20 per cent of the venture capital shares of a class and that venture capital company during that year of assessment gives notice to the Commissioner in writing that the venture capital company will cancel all the issued shares in that class of shares; and
(b) that venture capital company cancels all the issued shares in that class of shares within six months from the date on which that notice is given.
[Subsection (3B) inserted by section 29(1)(j) of Act 23 of 2018 and amended by section 17(1) of Act 23 of 2020 deemed effective on 31 July, 2020 and applicable in respect of years of assessment ending on or after that date]
(3C) The deduction to be allowed in terms of subsection (2) in respect of a year of assessment in respect of expenditure incurred during that year by a taxpayer that is-
(a) a company must not exceed R5 million; and
(b) a person other than a company must not exceed R2,5 million.
[Subsection (3C) inserted by section 17(1)(c) of Act 34 of 2019 deemed effective on 21 July, 2019 and applicable in respect of expenditure incurred by the taxpayer on or after that date]
(4) A claim for a deduction in terms of subsection (2) must be supported by a certificate issued by the venture capital company stating the amounts invested in that company and that the Commissioner approved that company as contemplated in subsection (5).
(5) The Commissioner must approve a venture capital company if that company has applied for approval and the Commissioner is satisfied that –
(a) the company is a resident;
(b) the sole object of the company is the management of investments in qualifying companies;
(c) ……….
(d) ……….
(e) the tax affairs of the company are in order and the company has complied with all the relevant provisions of the laws administered by the Commissioner;
(f) ……….
(g) the company is licensed in terms of section 8(5) of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002).
[Paragraph (g) substituted by section 29 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment commencing on or after that date.]
(6) If the Commissioner is satisfied that any venture capital company approved in terms of subsection (5) has during a year of assessment failed to comply with the provisions of that subsection, the Commissioner must after due notice to the company withdraw that approval from the commencement of that year if corrective steps acceptable to the Commissioner are not taken by the company within a period stated in that notice.
(6A) If, at the end of any year of assessment, after the expiry of a period of 48 months commencing on the first date of the issue of venture capital shares-
(a) ……….
(b) less than 80 per cent of the expenditure incurred by the company to acquire assets held by the company was incurred to acquire qualifying shares issued to the company by qualifying companies, each of which, immediately after the issue, held assets with a book value not exceeding –
[Words preceding subparagraph (i) substituted by section 23 of Act 25 of 2015 effective on 1 January 2015]
(i) R500 million, where the qualifying company was a junior mining company; or
(ii) R50 million, where the qualifying company was a company other than a junior mining company; or
[Paragraph (b) amended by section 38 of Act 24 of 2011 and substituted by section 23 of Act 43 of 2014 effective on 1 January 2015]
(c) more than 20 per cent of any amounts received in respect of the issue of shares in the company was utilised to acquire qualifying shares issued to the company by any one qualifying company,
[Paragraph (c) substituted by section 38 of Act 24 of 2011, section 23 of Act 43 of 2014 and section 23 of Act 25 of 2015 effective on 1 January 2015]
the Commissioner must after due notice to the company withdraw that approval with effect from the commencement of the year of assessment during which the period ends that is stated in that notice during which corrective steps acceptable to the Commissioner must be taken if corrective steps acceptable to the Commissioner are not taken by the company within the period stated in that notice.
[Subsection (6A) inserted by section 25(1)(g) of Act 17 of 2009 and amended by section 23(1)(b) of Act 43 of 2014, by section 29(1)(l) of Act 23 of 2018 and by section 17(1)(d) of Act 34 of 2019 deemed effective on 21 July, 2019]
(7) A company may apply for approval in terms of subsection (5) in respect of the year of assessment following the year of assessment during which approval was withdrawn in respect of that company in terms of subsection (6) or (6A) if the non-compliance which resulted in the withdrawal has been rectified to the satisfaction of the Commissioner.
(8) If the Commissioner withdraws the approval of a company in terms of subsection (6) or (6A), an amount equal to 125 per cent of the expenditure incurred by any person for the issue of shares held in the company must be included in the income of the company in the year of assessment in which the approval is withdrawn by the Commissioner.
(9) Notwithstanding section 8(4), no amount shall be recovered or recouped in respect of the disposal of a venture capital share or in respect of a return of capital if that share has been held by the taxpayer for a period longer than five year section.
[Subsection (9) deleted by section 271 of Act 28 of 2011, re-inserted by section 23 of Act 43 of 2014 and substituted by section 28 of Act 17 of 2017 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]
(10) A venture capital company must submit to the Minister a report providing the Minister with the information that the Minister may prescribe.
(11) No deduction shall be allowed under this section in respect of shares acquired after 30 June 2021.
“Venture capital share” definition of section 12J of ITA
“venture capital share” means an equity share held by a taxpayer in a venture capital company which was issued to that taxpayer by that venture capital company, and does not include any share which-
[Words preceding paragraph (b) substituted by section 29 of Act 23 of 2018 effective on 1 January 2019 applies in respect of years of assessment commencing on or after that date]
(b) would have constituted a hybrid equity instrument, as defined in section 8E(1), but for the three-year period requirement contemplated in paragraph (b)(i) of the definition of ‘hybrid equity instrument’ in that section;
[Paragraph (b) substituted by section 29 of Act 23 of 2018 effective on 1 January 2019 applies in respect of years of assessment commencing on or after that date]
(c) constitutes a third-party backed share as defined in section 8EA(1); or
(d) was issued to that taxpayer solely in respect or by reason of services rendered or to be rendered by that taxpayer in respect of the incorporation, marketing, management or administration of that venture capital company or of any qualifying company in which that venture capital company holds or acquires any share.
[Paragraph (d) added by section 29 of Act 23 of 2018 effective on 24 October 2018]
“Venture capital company” definition of section 12J of ITA
“venture capital company” means a company that has been approved by the Commissioner in terms of subsection (5) and in respect of which such approval has not been withdrawn in terms of subsection (3A), (3B), (6) or (6A);
[Definition of “venture capital company” substituted by section 25 of Act 17 of 2009, amended by section 38 of Act 24 of 2011 and substituted by section 29 of Act 23 of 2018 effective on 1 January 2019, applies in respect of years of assessment commencing on or after that date]
“Qualifying share” definition of section 12J of ITA
“qualifying share” means an equity share held by a venture capital company which is issued to that company by a qualifying company, and does not include any share which-
(b) would have constituted a hybrid equity instrument, as defined in section 8E(1), but for the three-year period requirement contemplated in paragraph (b)(i) of the definition of “hybrid equity instrument” in that section; or
[Paragraph (b) substituted by section 29 of Act 23 of 2018 effective on 1 January 2019 applies in respect of years of assessment commencing on or after that date]
(c) constitutes a third-party backed share as defined in section 8EA(1);
“Qualifying company” definition of section 12J of ITA
‘qualifying company’ means any company if –
(a) that company is a resident;
(b) the company is not a controlled group company in relation to a group of companies of which a venture capital company to which that company has issued any share forms part from the date of issue of any such share and at any time during any year of assessment after that date;
[Paragraph (b) substituted by section 38(1)(c) of Act 24 of 2011, by section 29(1)(a) of Act 23 of 2018 and by section 17(1)(a) of Act 34 of 2019]
(c) the tax affairs of the company are in order and the company has complied with all the relevant provisions of the laws administered by the Commissioner;
(d) the company is an unlisted company as defined in section 41 or a junior mining company;
(e) the company is not carrying on any impermissible trade;
[Paragraph (e) substituted by section 25 of Act 17 of 2009 and amended by section 29 of Act 23 of 2018 effective on 1 January 2019 and applies in respect of participation rights acquired on or after that date]
(f) during any year of assessment of that company that ends after the expiry of a period of 36 months commencing on the first date on which that company issued any share to a venture capital company-
(i) the sum of the investment income, as defined in section 12E(4)(c), derived by that company does not exceed an amount equal to 20 per cent of the gross income of that company for that year; and
(ii) not more than 50 per cent of the aggregate amount received by or that accrued to that company from the carrying on of any trade was derived, directly or indirectly, from a person-
(aa) who holds a share in that venture capital company; or
(bb) who is a connected person in relation to a person referred to in item (aa);
[Paragraph (f) substituted by section 25 of Act 17 of 2009 and section 29 of Act 23 of 2018 effective on 24 October 2018]
(g) no person who holds a share in a venture capital company to which that company has issued any share holds, directly or indirectly and whether alone or together with any connected person in relation to that person, more than 50 per cent of the participation rights, as defined in section 9D(1), or of the voting rights in that company; and
[Paragraph (g) deleted by section 25 of Act 17 of 2009 and re-inserted by section 29 of Act 23 of 2018 effective on 1 January 2019 and applies in respect of participation rights acquired on or after that date]
(h) that company does not carry on any trade in relation to a venture, business or undertaking or part thereof that was acquired by that company, directly or indirectly, from a person-
(i) who holds a share in a venture capital company to which that company has issued any share; or
(ii) who is a connected person in relation to a person referred to in subparagraph (i);
[Paragraph (h) inserted by section 29 of Act 23 of 2018 effective on 1 January 2019, applies in respect of any trade carried on which commenced on or after that date]
“Junior mining company” definition of section 12J of ITA
‘junior mining company’ means any company that is solely carrying on a trade of mining exploration or production which is either an unlisted company as defined in section 41 or listed on the alternative exchange division of the JSE Limited;
“Impermissible trade” definition of section 12J of ITA
(1) For the purposes of this section-
‘impermissible trade’ means-
(a) any trade carried on in respect of immovable property, other than a trade carried on as an hotel keeper;
(b) any trade carried on by a bank as defined in the Banks Act, a long-term insurer as defined in the Long-term Insurance Act, a short term insurer as defined in the Short-term Insurance Act and any trade carried on in respect of money-lending or hire-purchase financing;
(c) any trade carried on in respect of financial or advisory services, including trade in respect of legal services, tax advisory services, stock broking services, management consulting services, auditing or accounting services;
(d) any trade carried on in respect of gambling;
(e) any trade carried on in respect of liquor, tobacco, arms or ammunition;
(f) ……….
(g) any trade carried on mainly outside the Republic;
Subsections 1A, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 17, 18, 19, 20, 21, 22, 23 and 24 of section 12I of ITA
(1A) For the purposes of this section, if a taxpayer completes an improvement as contemplated in section 12N, the improvement shall be deemed to be a new and unused manufacturing asset and the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost of that new and unused manufacturing asset contemplated in subsection (2).
(1B) For the purposes of this section, if a taxpayer completes an improvement on any land not owned by that taxpayer and that improvement consists of machinery or plant as contemplated in section 12C(1)(a), that taxpayer shall be deemed to be the owner of that improvement.
[Subsection (1B) inserted by section 22 of Act 43 of 2014 effective on 1 January 2015]
(2) In addition to any other deductions allowable in terms of this Act, a company may, subject to subsection (3), deduct an amount (hereinafter referred to as an additional investment allowance) equal to-
(a)
(i) 55 per cent of the cost of any new and unused manufacturing asset used in an industrial policy project with preferred status; or
(ii) 100 per cent of the cost of any new and unused manufacturing asset used in an industrial policy project with preferred status that is located within a special economic zone; or
[Subparagraph (ii) substituted by section 22 of Act 43 of 2014 effective on the date on which the Special Economic Zones Act, operational on 9 February 2016]
(b)
(i) 35 per cent of the cost of any new and unused manufacturing asset used in any industrial policy project other than an industrial policy project with preferred status; or
(ii) 75 per cent of the cost of any new and unused manufacturing asset used in any industrial policy project other than an industrial policy project with preferred status that is located within a special economic zone;
[Subparagraph (ii) substituted by section 22 of Act 43 of 2014 effective on the date on which the Special Economic Zones Act, operational on 9 February 2016]
in the year of assessment during which that asset is first brought into use by the company as owner thereof for the furtherance of the industrial policy project carried on by that company, if that asset was acquired and contracted for on or after the date of approval and was brought into use within four years from the date of approval.
(3) The additional investment allowance contemplated in subsection (2) may not exceed-
(a) R900 million in the case of any greenfield project with preferred status, or R550 million in the case of any other greenfield project from the date of approval;
(b) R550 million in the case of any brownfield project with preferred status, or R350 million in the case of any other brownfield project from the date of approval.
(4) In addition to any other deductions allowable in terms of this Act, a company may, subject to subsection (5), deduct an amount (hereinafter referred to as an additional training allowance) equal to the cost of training provided to employees in the year of assessment during which the cost of training is incurred for the furtherance of the industrial policy project carried on by that company.
(5)
(a) The cost of training contemplated in subsection (4) must be incurred by the end of the compliance period.
(b) Notwithstanding subsection (2), there must be allowed to be deducted, not earlier than the year of assessment preceding the year in which the asset is brought into use, any amount in respect of the additional training allowance.
(c) The additional training allowance contemplated in subsection (4) allowed to a company may not exceed R36 000 per employee.
(d) The additional training allowance contemplated in subsection (4) allowed to a company at the end of the compliance period from the date of approval may not exceed-
(i) R30 million in the case of an industrial policy project with preferred status; and
(ii) R20 million in the case of any other industrial policy project.
[Subsectoin (5) substituted by section 22 of Act 25 of 2015 effective on 1 January 2016]
(6)
(a) Where a taxpayer is allowed a deduction in terms of subsection (2) in the current or any previous year of assessment, any balance of assessed loss carried forward by the taxpayer during a year of assessment must be increased by the amount by which that balance of assessed loss exceeds an amount equal to any balance of assessed loss that would have been carried forward during that year had that deduction not been allowed, multiplied by the rate contemplated in paragraph (a) of the definition of ‘prescribed rate’ as at the end of the year of assessment.
(b) Paragraph (a) does not apply in respect of any balance of assessed loss incurred by a taxpayer during any year of assessment more than four years after the year during which the approval contemplated in subsection (8) is granted.
(7) An industrial project of a company constitutes an industrial policy project if-
(a) the Minister of Trade and Industry, after taking into account the recommendations of the adjudication committee, is satisfied that-
(i) the cost of all manufacturing assets to be acquired by the company for the purposes of the project will exceed-
(aa) in the case of greenfield projects, R50 million; and
[Item (aa) substituted by section 22 of Act 43 of 2014 effective on 1 January 2015]
(bb) in the case of brownfield projects, the higher of-
(A) R30 million; or
(B) the lesser of R50 million or 25 per cent of the expenditure incurred to acquire assets previously used in the project;
[Subitem (B) substituted by section 22 of Act 43 of 2014 effective on 1 January 2015]
(ii) the project does not constitute an industrial participation project and does not receive any concurrent industrial incentive provided by any national sphere of government; and
(iii) the project is not integrally related to any other project of the company (or any other company that forms part of the same group of companies as that company) that has been approved as contemplated in subsection (8);
(iv) ……….
[Subparagraph (iv) deleted by section 22 of Act 25 of 2015 effective on 8 January 2009]
(b) ……….
(c) more than 50 per cent of the manufacturing assets to be acquired by the company for the purposes of the project will be brought into use by that company within four years from the date of approval; and
(d) the application for approval of the project by the company is received by the Minister of Trade and Industry not later than 31 March 2020, in such form and containing such information as the Minister of Trade and Industry may prescribe.
[Paragraph (d) substituted by section 26 of Act 7 of 2010, section 22 of Act 25 of 2015 and section 27 of Act 17 of 2017 effective on 31 March 2017]
(8) The Minister of Trade and Industry must, after taking into account the recommendations of the adjudication committee, approve an industrial project as an industrial policy project, either with or without preferred status, where that Minister is satisfied that the industrial policy project will significantly contribute to the Industrial Policy Programme within the Republic having regard to-
(a) the extent to which the project will upgrade an industry within the Republic by-
(i) utilising innovative processes;
(ii) utilising new technology that results in-
(aa) improved energy efficiency; and
(bb) cleaner production technology; and
(iii) providing skills development;
(b) the extent to which the project will provide general business linkages within the Republic;
(c) the extent to which the project will acquire goods or services from small, medium and micro enterprises;
(d) ……….
[Paragraph (d) deleted by section 22 of Act 43 of 2014 effective on 1 January 2015]
(e) the extent to which the project will provide skills development in the Republic; and
(f) in the case of a greenfield project, the location of the project within a special economic zone.
[Paragraph (f) substituted by section 22 of Act 43 of 2014 effective on the date on which the Special Economic Zones Act is operational, 9 February 2016]
(9) Notwithstanding subsection (8), the Minister of Trade and Industry may not approve any industrial project where the potential additional investment and training allowances in respect of that project and all other approved industrial projects (other than those projects where the approval thereof has been withdrawn under subsection (12)), will in the aggregate exceed R20 billion.
(10) The Minister of Finance, in consultation with the Minister of Trade and Industry, must make regulations prescribing-
(a) the factors to be taken into account in determining whether the industrial project will significantly contribute to the Industrial Policy Programme within the Republic;
(b) the factors to be taken into account in determining whether the project will provide general business linkages within the Republic;
(c) the factors to be taken into account in determining whether goods or services will be acquired from small, medium and micro enterprises;
(d) ……….
[Paragraph (d) deleted by section 22 of Act 43 of 2014 effective on 1 January 2015]
(e) the extent to which the project must provide skills development in the Republic and the factors to be taken into account in determining whether the project provides skills development in the Republic;
(f) the factors to be taken into account in determining the location of the project within a special economic zone.
[Paragraph (f) substituted by section 22 of Act 43 of 2014 effective on the date on which the Special Economic Zones Act is operational, 9 February 2016]
(g) the extent to which the project must improve energy efficiency and the factors to be taken into account in determining the extent to which the project must utilise new technology that results in improved energy efficiency and cleaner production technology; and
(h) what constitutes an industrial participation project and a concurrent industrial incentive.
(11) Within 12 months after the close of each year of assessment, starting with the year in which approval is granted in terms of subsection (8), a company carrying on an industrial policy project must report until the end of the compliance period to the adjudication committee with respect to the progress of the industrial policy project in terms of the requirements of subsections (7) and (8) within such time, in such form and in such manner as the Minister of Finance may prescribe.
[Subsection (11) substituted by section 6 of Act 21 of 2012 and section 22 of Act 25 of 2015 effective on 8 January 2009]
(12) Where in respect of any company carrying on an industrial policy project-
(a)
(i) during any year of assessment-
(aa) any material fact changes; or
(bb) the company fails to comply with any requirement contemplated in subsection (7), which would have had the effect that approval in terms of subsection (8) would not have been granted had such change in fact or such failure been known to the Minister of Trade and Industry at the time of granting approval; or
(ii) the company fails to comply with any requirement contemplated in subsection (8) at the end of the compliance period;
[Paragraph (a) substituted by section 22 of Act 25 of 2015 effective on 8 January 2009]
(b) the company fails to submit a report to the adjudication committee as required in terms of subsection (11); or
(c) the approval granted in terms of subsection (8) was based on fraudulent information or misrepresentation or non-disclosure of material facts,
the Minister of Trade and Industry may, after taking into account the recommendations of the adjudication committee, withdraw the approval granted in respect of that industrial policy project with effect from a date specified by that Minister, and must inform the Commissioner of that withdrawal and of that date.
(12A) Where in respect of any company carrying on an industrial policy project the Minister of Trade and Industry approved that project as an industrial policy project with preferred status in terms of subsection (8) in accordance with Regulation 4 of the Regulations (GNR.639 of 23 July 2010: Government Gazette No. 33385) as amended) and that project did not comply with the criteria of a project with preferred status at the end of the compliance period, the Minister of Trade and Industry may, after taking into account the recommendations of the adjudication committee, withdraw the approval granted in respect of that industrial policy project as an industrial policy project with preferred status and substitute that approval with an approval of the industrial policy project as a project with qualifying status with effect from a date specified by that Minister, and must inform the Commissioner of that withdrawal, substitution and of that date.
[Subsection (12A) inserted by section 31 of Act 15 of 2016 effective on 19 January 2017]
(13) The Commissioner may, notwithstanding the provisions of Chapter 6 of the Tax Administration Act–
(a) notify the Minister of Trade and Industry whenever the Commissioner discovers information that may cause a withdrawal of approval in terms of subsection (12);
(b) disallow all deductions otherwise provided for under this section starting with the date of approval if the 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 and must notify the Minister of Trade and Industry accordingly; and
(c) inform the Minister of Trade and Industry where any company has requested the Commissioner to issue a certificate contemplated in subsection (7)(b)(ii) and that certificate was denied;
[Paragraph (c) amended by section 31 of Act 15 of 2016 effective on 19 January 2017]
(d) where the approval granted in respect of that industrial policy project as an industrial policy project with preferred status was withdrawn and substituted as an industrial policy project with qualifying status as contemplated in subsection (12A), make an appropriate adjustment to the taxable income of that company during the year of assessment in which that approval is substituted in relation to all deductions of the company as at the end of that year of assessment, having regard to all amounts which would have been deemed to have been incurred by that company had the provisions of this paragraph not been applicable during all years of assessment before that year of assessment and all amounts which have been deducted from the income of that company during those years of assessment.
[Paragraph (d) added by section 31 of Act 15 of 2016 effective on 19 January 2017]
(14) The Commissioner may, notwithstanding the provisions of sections 99(1) and 100 of the Tax Administration Act, raise an additional assessment for any year of assessment where-
(a) an additional investment allowance which has been allowed in any previous year must be disallowed in terms of subsection (12) or (13); or
(b) an adjustment must be made as contemplated in subsection (13)(d).
[Subsection (14) substituted by section 271 read with paragraph 36(b) of Schedule 1 of Act 28 of 2011 and by section 31(c) of Act 15 of 2016 and amended by section 5 of Act 18 of 2023]
(15) ……….
(16) There shall for the purposes of this section be an adjudication committee which must consist of at least-
(a) three persons employed by the Department of Trade and Industry, appointed by the Minister of Trade and Industry; and
(b) three persons employed by the National Treasury or the South African Revenue Service, appointed by the Minister of Finance:
Provided that the Minister of Trade and Industry or the Minister of Finance, as the case may be, may appoint alternative persons so employed if any person appointed in terms of paragraph (a) or (b) is not available to perform any function as a member of the committee.
(17) The adjudication committee is an independent committee which performs its functions impartially and without fear, favour or prejudice and for the purpose of this section, the adjudication committee may-
(a) evaluate any application and make recommendations to the Minister of Trade and Industry for purposes of the approval of any industrial project in terms of subsection (8);
(b) investigate or cause to be investigated any industrial policy project for the purposes of this section;
(c) monitor all industrial policy projects-
(i) to determine whether the objectives of this section are being achieved; and
(ii) to advise the Minister of Finance and the Minister of Trade and Industry on any future proposed amendment or adjustment thereof;
(d) require any company applying for approval of any industrial project as an industrial policy project in terms of this section to furnish such information or documents as are necessary for the committee and Minister of Trade and Industry to perform their functions in terms of this section;
(e) for a specific purpose and on such conditions and for such period as it may determine obtain the assistance of any person to advise the adjudication committee relating to any function assigned to the committee in terms of this section; and
(f) appoint its own chairperson and determine the procedures for its meetings provided that all procedures must be properly recorded and minuted.
(18) The members of the adjudication committee and any person whose assistance has been obtained by that committee may not-
(a) act in any way that is inconsistent with the provisions of subsection (17) or expose themselves to any situation involving the risk of a conflict between their responsibilities and private interests; or
(b) use their position or any information entrusted to them, to enrich themselves or improperly benefit any other person.
(19) The Minister of Trade and Industry-
(a) may, after taking into account the recommendations of the adjudication committee, extend the periods contemplated in subsections (2), (6)(b) and (7)(c) by a period not exceeding one year;
[Paragraph (a) substituted by section 31 of Act 15 of 2016 effective on 19 January 2017]
(aA) may, if application is made to the adjudication committee, after taking into account the recommendations of the adjudication committee in respect of that application, extend the periods contemplated in—
(i) paragraph (b) of the definition of “compliance period” in subsection (1); and
(ii) subsections (2), (6)(b) and (7)(c),
by a period not exceeding two years, in addition to the extension of periods contemplated in paragraph (a), if it is shown that the fundamental reason for non-compliance was the COVID-19 pandemic or any circumstances arising therefrom;
[Paragraph (aA) inserted by section 15(1) of Act 20 of 2021 deemed effective on 1 January, 2020]
(b) must provide written reasons for any decision to grant or deny any application for approval of an industrial project as an industrial policy project in terms of subsection (8), or for any withdrawal of approval as contemplated in subsection (12);
(c) must inform the Commissioner of the approval of any industrial project as an industrial policy project in terms of subsection (8), setting out such particulars as are required by the Commissioner to determine the amount of the additional investment allowance allowable in terms of this section;
(d) must publish the particulars of any application received from a company for approval of an industrial project as an industrial policy project in the Gazette not later than 30 days after providing to that company the written reasons for any decision as contemplated in paragraph (b);
(e) must submit an annual report to Parliament, and must provide a copy of that report to the Auditor-General, setting out the following information in respect of each company that received approval in terms of subsection (8):
(i) The name of each company;
(ii) the description of each industrial policy project;
(iii) the potential national revenue forgone by virtue of the deductions allowable in respect of that industrial policy project in terms of this section;
(iv) the annual progress relating to the direct benefits of the industrial policy project in terms of economic growth or employment, setting out the details of the factors contemplated in subsections (7) and (8) on the basis of which approval of the industrial project as an industrial policy project was granted;
(v) any decision to withdraw the approval of an industrial policy project in terms of subsection (12); and
(vi) any decision not to withdraw the approval of an industrial policy project, despite any material change in facts.
(20) ……….
[Subsection (20) deleted by section 22 of Act 25 of 2015 effectve on 8 January 2016]
(21) Notwithstanding the provisions of Chapter 6 of the Tax Administration Act, the Commissioner must disclose to the Minister of Trade and Industry and the adjudication committee, including any person whose assistance has been obtained by that committee, such information relating to the affairs of any company carrying on an industrial policy project as is necessary to enable the Minister of Trade and Industry and the adjudication committee to perform their functions in terms of this section.
(22) Every employee of the Department of Trade and Industry and every member of the adjudication committee, including any person whose assistance has been obtained by that committee, must preserve and aid in preserving secrecy with regard to all matters that may come to their knowledge in the performance of their functions in terms of this section, and may not communicate any such matter to any person whatsoever other than to the company concerned or its legal representative, nor allow any such person to have access to any records in the possession or custody of that Department or committee, except in terms of the law or an order of court.
(23) Any person who contravenes the provisions of subsections (18) and (22), is guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding two years.
(24) For the purposes of this section the cost to a taxpayer of any manufacturing asset is deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if the person had acquired that manufacturing asset under a cash transaction concluded at arm s length on the date on which the transaction for the acquisition was in fact concluded, have incurred in respect of the direct cost of the acquisition of the manufacturing asset.
“Manufacturing asset” definition of section 12I of ITA
‘manufacturing asset’ means any building, plant or machinery acquired, contracted for or brought into use by a company, which –
(a) will mainly be used by that company in the Republic for the purposes of carrying on an industrial project of that company within the Republic; and
(b) will qualify for a deduction in terms of section 12C(1)(a), 13 or 13 quat;
and includes any improvement to such building, plant or machinery.