PART VI – Proceeds – Page 2

(2) The board may –

(a) evaluate and approve any project, to be carried on by a company, as a qualifying project;

(b) investigate or cause to be investigated any project for the purposes of this section;

(i) determine whether the objectives of that scheme are being achieved; and

(ii) advise the Minister of Finance and the Minister of Trade and Industry on any future proposed amendment or adjustment thereof;

(d) direct that where this section is applicable to any company, the company shall be excluded from any such further assistance from the State as the board may determine;

(e) require any company contemplated in subsection (4) to furnish the board with any such information or documents as are necessary for the board to perform its functions in terms of this section; and

(f) perform such other functions as are assigned to it under this section.

(3) The board shall not approve any project as a qualifying project –

(a) if it is of the opinion that the project to be carried on by any company is substantially the same manufacturing concern as was or is carried on by any other person within the Republic on or before the submission of the application for approval of the project in terms of subsection (4); or

(b) after the commencement of the carrying on of such project by any company.

(4) Any application by a company for the approval by the board of any project to be carried on by such company as a qualifying project, shall be made directly to the board in such form as the board may prescribe.

(5) This section shall apply to any project which has been approved by the board as a qualifying project in respect of any application received by the board from the relevant company on or before 30 September 1999.

(6) An application contemplated in subsection (4) shall be in respect of a project which shall consist of one or more of the following components –

(a) a spatial component as contemplated in subsection (14) (b);

(b) an industry component as contemplated in subsection (14) (c); and

(7) In determining whether a project is a qualifying project, the board shall –

(a) have regard to the –

(i) financial viability of the project;

(ii) effect on national competitiveness;

(iii) utilisation of resources;

(iv) utilisation of competitive technology; and

(v) commitment to the upgrading and training of local skills; and

(b) subject to subsection (8) –

(i) analyse each component of the project; and

(ii) where it is satisfied that such component is a component as contemplated in subsection (14) (b), (c) or (d), as the case may be, certify such component accordingly.

(8) Where the project consists solely of a human resource component or where one of the components of a project consists of a human resource component, the board shall –

(a) subject to paragraph (b), carry out an initial analysis and certification of such human resource component on application for approval of the project; and

(b) review such initial analysis and certification –

(i) where the project consists solely of a human resource component, within six months after the end of the first year of assessment during which the qualifying company commences its tax holiday status; and

(ii) where the project consists of more than one component, one of which is a human resource component, before the expiration of the tax holiday status of the qualifying company attributable to the certification by the board of all other components of such project.

(9) Where the board has approved a project to be carried on by a company as a qualifying project, the tax holiday status of such company shall, subject to subsections (10) and (15), be a period of –

(a) two consecutive years of assessment where the board has certified one component of the project;

(b) four consecutive years of assessment where the board has certified two components of the project; or

(10) Where a project consists of more than one component. one of which is a human resource component, the period of the tax holiday status in respect of such human resource component shall, for the purposes of this section, be deemed to commence as from the commencement of the year of assessment immediately subsequent to the expiration of the period of the tax holiday status in respect of every other component.

(11) The tax holiday status of a qualifying company shall commence as from the commencement of the first year of assessment during which such qualifying company derives a taxable income.

(12) Where a qualifying company has a year of assessment ending during the period of six months ending 31 March 1997, there shall be allowed to be deducted from the income of such company in respect of such year of assessment, an amount equal to the taxable income in respect of such year of assessment of such company as determined before granting a deduction under this subsection.

(13) Notwithstanding the provisions of this section, a qualifying company shall no longer enjoy tax holiday status after the expiry of 10 years as from the commencement of the year of assessment during which the project which is carried on by the qualifying company was approved as a qualifying project by the board.

(14) The Minister of Trade and Industry may in consultation with the Minister of Finance make regulations to –

(a) prescribe the investment requirements for any project having regard to the amount of capital invested in –

(i) land whereon and buildings wherein the process of manufacture is to be carried on; and

(ii) machinery and plant to be used directly in the process of manufacture;

(b) provide for the demarcation of a location with an existing specialisation and advantage in manufacturing within which a project is to be carried on (in this section referred to as the spatial component), having regard to the –

(i) reinforcement of secondary cities;

(ii) reinforcement of key urban nodes along any development corridor which qualifies as a spatial development initiative;

(iii) consolidation of emerging agglomeration areas where a sufficient supply of appropriate infrastructure is available; and

(iv) supporting of the diversification of local economies where a sufficient supply of appropriate infrastructure is available as a result of the restructuring of existing manufacturing activities;

(c) identify any manufacturing group (as contemplated in the Standard Industrial Classification of all Economic Activities (Fifth Edition) issued by the Central Statistical Services in January 1993) that, on an average basis, is likely to contribute most significantly to the achievement of sustainable economic growth and employment creation in the medium to longer term through enhanced international competitiveness, as a qualifying industry (in this section referred to as the industry component), having regard to the –

(i) employment and output linkages throughout the economy;

(ii) capital to human resource ratio;

(iii) generation of increased output; and

(iv) potential to experience an increase in international demand for such group’s products, goods, articles or any other things over the short to medium term;

(d) prescribe a ratio in respect of human resource remuneration to value added (in this section referred to as the human resource component);

(e) prescribe criteria in order to determine for the purposes of –

(i) subsection (3) (a), whether the project to be carried on by the company is substantially the same manufacturing concern as is or was carried on by any other person within the Republic having regard to the –

(aa) scale and scope of the project;

(bb) extent of the utilisation of –

(A) machinery and plant; or

(B) human resources;

(cc) influence thereof on the national normal tax base in existence on the date on which the application for approval is considered by the board; and

(dd) relationship between such company or its shareholders and any previous owner of such manufacturing concern; and

(ii) subsection (3) (b), when the carrying on of a project commences;

(f) define any expression referred to in this subsection, if necessary;

(g) further describe and define the issues as contemplated in subsection (7) (a) to which the board shall have regard; and

(h) prescribe and define any condition as he may deem necessary for the evaluation, approval or monitoring of a project or the monitoring of the tax holiday scheme.

(15) Where the –

(a) board is satisfied that the approval of the project was obtained by fraud or as a result of any misrepresentation or failure to disclose any material fact by the company, the board shall, unless it otherwise directs, withdraw such approval if it is satisfied that in the light of the full facts such approval should not have been granted and, in such a case, such approval shall be deemed to have been withdrawn as from the date on which such project was approved as a qualifying project;

(b) board, in reviewing its initial analysis and certification of the human resource component as contemplated in subsection (8) (b), is satisfied that such human resource component is not a human resource component as contemplated in subsection (14) (d), the board shall, unless it otherwise directs, withdraw the certification of such human resource component and such certification shall, where it was reviewed in terms of –

(i) subsection (8) (b) (i), be deemed to have been withdrawn as from the commencement of the year of assessment wherein such review takes place; and

(ii) subsection (8) (b) (ii), be deemed to be withdrawn as from the date of the board’s initial certification of such human resource component;

(c) board is satisfied that a spatial component or an industry component no longer constitutes a spatial component or an industry component, as the case may be, as contemplated in subsection (14) (b) or (c), as the case may be, as a result of any reason other than a reason contemplated in paragraph (a), the board shall, unless it otherwise directs, withdraw the certification of such spatial component or industry component, as the case may be, and such certification shall be deemed to have been withdrawn from the commencement of the year of assessment during which such spatial component or industry component, as the case may be, no longer constitutes such a spatial component or such an industry component, as the case may be, as originally certified by the board; or

(d) Commissioner is satisfied that a qualifying company has entered into or carried out any transaction, operation or scheme whereby any goods or services are, directly or indirectly –

(i) supplied to a connected person in relation to the qualifying company; or

(ii) acquired from a connected person in relation to the qualifying company,

and the goods or services are supplied or acquired, as the case may be, at a price which is either –

(aa) less than the price which such goods or services might have been expected to fetch if the parties to the transaction had been independent persons dealing at arm’s length (such price being the arm’s length price); or

(bb) greater than the arm’s length price,

the tax holiday status of such qualifying company shall, unless the Commissioner otherwise directs, lapse from the commencement of the year of assessment during which such qualifying company entered into or carried out such transaction, operation or scheme.

(16) Where subsection (15) (a) has been applied, the company shall pay, in addition to the tax chargeable in respect of its taxable income for each of the years of assessment during which the tax holiday status was previously granted, an amount equal to twice the tax chargeable in respect of its taxable income for each of such years of assessment.

(17)

(a) The Commissioner may in his discretion remit the additional charge imposed by subsection (16) or any part thereof.

(b) Notwithstanding the provisions of this subsection, the Commissioner may either before or after an assessment is issued agree with the company on the amount of the additional charge to be paid, and the amount so agreed upon shall not be subject to any objection and appeal.

(18)

(a) The board shall notify the company and the Commissioner of any decision taken in accordance with subsection (2), (3), (7) or (15) (a), (b) or (c) within a period of 30 days after the approval of the minutes of the meeting whereat such decision was taken.

(b) The board shall furnish the company with reasons for any decision contemplated in paragraph (a) simultaneously with the notification of such decision.

(19)

(a) Notwithstanding the provisions of section 4, the Commissioner may disclose to the board such information relating to the company’s affairs as is necessary to enable the board to perform its functions in terms of this section.

(b) Before disclosing such information the Commissioner shall deliver or send to the company a written notification of his intended action setting forth particulars of the said information.

(c) The company may within 30 days after the date of such written notification or such further period as the Commissioner may approve, lodge in writing with the Commissioner any objection it may have to the disclosure of the information.

(d) If, on the expiry of the said period of 30 days or the said further period, no objection has been lodged as contemplated in paragraph (c) or, if an objection has been lodged and the Commissioner is not satisfied that the objection should be sustained, the Commissioner may thereupon disclose such information as contemplated in paragraph (a).

(20)

(a) The members and employees of the board shall 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 shall not communicate any such matter to any person whatsoever other than the company concerned or its legal representative nor suffer or permit any such person to have access to any records in the possession or custody of the Commissioner, except in the performance of their functions as members and employees of the board or by order of a competent court.

(b) Every member and employee of the board shall take and subscribe before a magistrate or justice of the peace or an officer of the South African Revenue Service who is a commissioner of oaths, such oath or solemn declaration, as the case may be, of fidelity or secrecy as may be prescribed.

(c) Any member or employee of the board who contravenes a provision of paragraph (a), shall be guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding two years.

(21) Where –

(a) the certification of a component in respect of a qualifying company has been withdrawn in terms of subsection (15) (b) or (c); or

(b) the tax holiday status of a qualifying company has lapsed in terms of subsection (15) (d),

the Commissioner may, notwithstanding the provisions of section 79, raise assessments in respect of the company as if such company were not a qualifying company.

(22) Any decision of the Commissioner under this section shall be subject to objection and appeal.

(23) The relevant division of the High Court may, on the application of a company which has made any application in terms of this section and which feels aggrieved by a decision made by the board in connection with that application, review the decision on the following grounds –

(a) interest in the application, bias, malice or the commission of an offence referred to in Part 1 to 4, or section 17, 20 or 21 (in so far as it relates to the aforementioned offences) of Chapter 2 of the Prevention and Combating of Corrupt Activities Act, 2004, on the part of any member of the board;

(b) gross irregularity in the proceedings; and

(24) The court in reviewing a decision of the board in terms of subsection (23) may, if the court is satisfied that –

(a) any of the grounds for review referred to in the said subsection has been proved; and

(b) the applicant has been substantially prejudiced by the decision,

set aside the decision, and shall, in setting aside the decision, unless in its opinion exceptional circumstances warrant another order, issue an order that the board consider afresh the matter in respect of which the decision was made.

(25)

(a) A company which has made any application in terms of this section and which feels aggrieved by a decision on a question of law made by the board in connection with the application, may appeal to the relevant division of the High Court against the decision.

(b) Such an appeal shall be noted and prosecuted as if it were an appeal against a judgement in a magistrate’s court in civil proceedings.

(c) If the court, after considering the appeal, is satisfied that the board has misdirected itself in the making of the decision concerned, the court may set aside that decision, and shall, in setting aside the decision, unless in its opinion exceptional circumstances warrant another order, issue an order that the board consider afresh the matter in respect of which the decision was made.

(2) There shall be allowed to be deducted from the income of the taxpayer, in respect of any year of assessment, an allowance equal to –

(a) in the case of a new and unused environmental treatment and recycling asset, 40 per cent of the cost to the taxpayer to acquire the asset in the year of assessment that it is brought into use for the first time by that taxpayer, and 20 per cent in each succeeding year of assessment; and

(b) in the case of a new and unused environmental waste disposal asset, five per cent of the cost to the taxpayer to acquire the asset in the year of assessment that it is brought into use for the first time by that taxpayer, and five per cent in each succeeding year of assessment.

(3) For the 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 or the cost which a person would, if that person had acquired such 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.

(4) Where any asset in respect of which any deduction is claimed in terms of this section was during any previous year of assessment used by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such year or any subsequent year in which such asset was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

(5) No deduction shall be allowed under this section in respect of any asset that has been disposed of by the taxpayer during any previous year of assessment.

(6) For purposes of determining the taxable income derived during any year of assessment by a taxpayer, there shall be allowed as a deduction any expenditure or loss in respect of decommissioning, remediation or restoration arising from any trade previously carried on by that taxpayer to the extent that such expenditure or loss –

(a) is incurred for purposes of complying with any law of the Republic that provides for the protection of the environment upon the cessation of trade;

(b) would otherwise have been allowed as a deduction in terms of section 11 had that taxpayer still been carrying on that trade; and

(7) Any assessed loss of a taxpayer as defined in section 20(2) that is attributable to any expenditure or loss contemplated in subsection (6) may be set off against income derived by that taxpayer during a year of assessment notwithstanding the fact that the taxpayer is not carrying on any trade during that year.

(8) No deduction shall be allowed under section 11, 12C or 13 in respect of the cost of an environmental treatment and recycling asset or an environmental waste disposal asset.

(9) The deductions which may be allowed in terms of this section in respect of any asset shall not in the aggregate exceed the cost to the taxpayer of such asset.

KMOS

Category: PART VI – Proceeds

“Qualifying company” definition of paragraph 37H of Eighth Schedule

“Qualifying project” definition of paragraph 37H of Eighth Schedule

“Services” definition of paragraph 37H of Eighth Schedule

“State” definition of paragraph 37H of Eighth Schedule

“Tax holiday scheme” definition of paragraph 37H of Eighth Schedule

“Tax holiday status” definition of paragraph 37H of Eighth Schedule

Sub-paragraphs 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24 and 25 of paragraph 37H of Eighth Schedule

“Goods” definition of paragraph 37H of Eighth Schedule

“Board” definition of paragraph 37H of Eighth Schedule

Sub-paragraphs 2, 3, 4, 5, 6, 7, 8 and 9 of paragraph 37B of Eighth Schedule