12I Tax Allowance Incentive for Businesses Offered Through the DTI

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In order to improve the productivity of the South African manufacturing sector, and improve the productivity and skills profile of the South African labour force, the DTI has introduced the 12I Tax Allowance Incentive schemes, the Investment Allowance and the Training Allowance. Both of the 12I Tax Allowance Incentive schemes will be discussed below.

The first scheme, The Industrial Policy Project Investment (Investment Allowance), is calculated on qualifying assets that may be deducted from taxable income in the financial year. Requirements for qualification are as follows:

  • The minimum investment for Qualifying Assets for Greenfield projects is R50 million, while an additional investment of R30 million is required for a Brownfield project.
  • The manufacturing assets are to acquired on or after the day of approval.
  • The investment must be classified under, “Section C: Manufacturing” in version 7 of the Standard Industrial Classification Code (the “SIC code”).

The Act has defined “Qualifying Assets” as “new and unused buildings and new and unused plant & machinery contracted for and acquired after the approval of the Section 12I tax allowance and brought into use within 4 years from the date of approval”.

Upon application, the DTI will send an approval letter, stating the exact amount approved for your qualifying assets. SARS will then publish notices regarding companies that were approved for the Section 12I Tax Allowance Incentive schemes.

The calculations for determining the points scored by Greenfield and Brownfield projects differ, and the project will receive the status of being either “Preferred” or “Qualifying”.

The second scheme, Training Allowance, allows for companies to claim training allowance where expenses have been incurred during the process of training employees.

The DTI calculates training allowances as the lesser of the actual total training cost, or R36 000 per full-time employee.

Contact Us
for assistance with qualifying for investment and training funds
provided by the Department of Trade and Industry (the DTI), the Section
12I Tax Allowance Incentive schemes.