1 PRODUCTION INCENTIVE MAXIMUM ENTERPRISE COST 10% - - PDF document

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Broadening Participation Incentives

INCENTIVE ELIGIBLE ENTERPRISE BENEFIT Incubator Support Programme ISP Applicants establishing new or expand existing incubators:- Legal entities registered through CIPC; Registered higher or further education institution; Licensed registered science council; Corporate or a private investor’s or an academic or research institution incubator in partnership with industry. Must focus on establishing & or growing enterprises that will graduate to sustainable enterprises.

NB: Business model; Commitment Letter; Financial Requirement; Market; Exit Strategy; & Sustainability.

Cost-sharing support of 50:50 for large businesses & a cost-sharing

• f 40:60 for SMMEs in CAPEX &

OPEX Capped at a max of R10mil (incl. VAT) per financial year over a three (3) year period funds.

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

Competitiveness Promotion Incentives

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

INCENTIVE ELIGIBLE ENTERPRISE BENEFIT Manufacturing Competitiveness Enhancement Programme MCEP Expansion projects (2yrs in operation if 1yr produce Management Accounts) Manufacturing under SIC code 3; Engineering services; & Conformity Assessment Agencies servicing the manufacturing sector (SIC88220) Level 4 B-BBEE contributor status

• Capital Investment
• Green Technology & Resource

Efficiency Improvement

• Enterprise-Level

Competitiveness

• Feasibility Studies
• Cluster Interventions

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

FRAMEWORK Non-taxable incentive calculated as a % of Manufacturing Value-Added (MVA) & capped as follows:- 10% MVA - Assets ˃R200m 20% MVA - Assets >R30m – <R200m 25% MVA - Assets >R5m – <R30m 0% MVA - Assets <R5m (direct cost sharing) MVA CALCULATION Sales/Turnover less Sales Value of Imported Goods less Sales Value of other Bought in Finished Goods less Material Input Goods (Used in Manufacturing Process) = MVA

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

MVA CALCULATION (Engineering services; & Conformity Assessment Agencies) Sales/Turnover less Sales Value of Imported Goods less Sales Value of other Bought in Finished Goods less Salaries/Wages = MVA MCEP COMPONENTS PRODUCTION INCENTIVE INDUSTRIAL FINANCING LOAN

• Calculated as a percentage of the applicant’s

average MVA over two years

• Support is limited to enterprise MVA
• Finance available for a term of up 4 years
• Finance up to R50m at fixed interest of 4%

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

Capital Investment Max R50m Focus Areas:- Machinery & equipment (M & E)

• Firms with assets below R5m should have min investment of R500K in M & E
• Conformity & Engineering should have min investment of R50K in M & E
• Firms with assets above R5m should have min investment of at least 20% of

the historical cost or R2m in M & E

• Conformity & Engineering should have min investment of at least 20% of the

historical cost in M & E Green Technology & Resource Efficiency Max R50m Focus Areas:- Cleaner Production; Waste Mgmt; Energy Efficiency; Renewable Energy; Water Use Efficiency; Conformity Assessments

• A cleaner production or energy efficiency audit or green technology assessment

audited report not older than 24 months is required Enterprise Level Competitiveness Improvement Focus Areas:- Process Optimisation; Product Improvements; Conformity Assessments; Logistics Improvements; Information Technology Systems; Skills Development; Procurement Process Improvements; Bidding costs (min R50m)

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

Feasibility Studies Max R7,5m Focus Area:- Development of bankable feasibility study for new manufacturing projects

• Qualifying costs will include engineering design costs, EIA costs & other relevant

consulting fees

• Pre-feasibility study report must demonstrate source of funding, buy-in from public

& private sector relevant the project, expect project min investment will be at least R30m Cluster Competitiveness Improvement Max R50m Focus Areas:- Market Research; Export Promotion costs; International Advertising & Publicity; International Marketing; Product Development; Process Improvements

• Five or more members complying with commercial regulations or NPO
• An eligible cluster should be a Special Purpose Corporate Vehicle (SPCV)

incorporated in South Africa

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PRODUCTION INCENTIVE COMPONENTS MAXIMUM SUPPORT ENTERPRISE ASSETS COST SHARING 10% BONUS Capital Investment R50m < R5m >R5m- <R30m >R30m-<R200m ˃R200m 50% 40% 30% 30% N/A >10 >20 >25 Green Technology & Resource Efficiency R50m < R5m >R5m- <R30m >R30m-<R200m ˃R200m 50% 40% 30% 30% N/A >10 >20 >25 Enterprise Level Competitiveness Improvement N/A < R5m >R5m- <R200m >R200m 70% 60% 50% N/A Feasibility Studies R7.5m < R30m >R30m->R200m 70% 50% N/A Cluster Competitiveness Improvement R50m N/A 80% N/A

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

Competitiveness Promotion Incentives

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

IMPORTANT NOTICE

• Projects should complete online applications 60 calendar days prior to commencement date of
• perations
• Should the dti not respond within the 60 calendar days after submission of a complete online

application, the applicant should notify the dti in writing of its intention to commission the qualifying assets for commercial use or undertake implementation of business development activities before approval

• The assets or activities will not be disqualified on the basis of having been in commercial use or being

undertaken before approval

• An automotives manufacturer with less than 25% of its base-year turnover earned as part of motor

manufacturers’ vehicle (light, medium or heavy) supply chain (including after-market supply) locally & or internationally may be considered for eligibility under MCEP

Manufacturing Incentives

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

Section 12i Tax Allowance 12i The allowance is deductible from taxable income in the same way as depreciation & other expenses. It reduces the amount of taxable income & eventually the amount of tax payable. The level of allowance is determined by a point scoring system:- A minimum of 5 points out of 10 must be scored. To achieve Qualifying Status: 5, 6 or 7 out of 10 must be scored To achieve Preferred Status: 8, 9 or 10 out of 10 must be scored

Manufacturing Incentives

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

SCORING

• Innovation (Max 1 points)
• Improved Energy Efficiency (Cleaner Production Technology) (Max 2

points)

• Business Linkages (Max 1)
• SMME Procurement (Max 1)
• Direct Employment Creation (Max 2)
• Skills Development (Training of Employees) (Max 2)
• Located in an Industrial Development Zone (IDZ) (Max 1 point)

Manufacturing Incentives

Norma Sali nsali@thedti.gov.za 012 394 1460 0861 843 384 www.thedti.gov.za

INCENTIVE ELIGIBLE ENTERPRISE BENEFIT Section 12i Tax Allowance 12i Greenfield project (R50mil qualifying assets: building, plant & machinery) Brownfield project (R30mil qualifying assets: building, plant & machinery) Skill development, 2% of wage bill Greenfield project Preferred Status 55% Max R900mil Qualifying Status 35% Max R550mil Brownfield project Preferred Status 55% Max R550mil Qualifying Status 35% Max R350mil The lesser of actual total own training costs or R36 000 per employee

Investment Allowance Calculation

INCENTIVE INVESTMENT ALLOWANCE CALCULATION Section 12i Tax Allowance 12i New project investing R1.7bn in Qualifying Assets Preferred status achieved (8, 9 or 10 points out of 10)

• Formula: Lesser of 55% of QA or a maximum of R900m
• Calculation: Lesser of 55% x R1.7bn = R935m or maximum of R900m
• Final Investment Allowance applicable = R900m

The allowance of R900m equates to a tax saving of R900m x 28% = R252k (28% is the prevailing companies’ tax rate). The full allowance will be deductible in the year of assessment (but within the 4 year limit) when at least 50% of the manufacturing assets are brought into use.

Norma Sali nsali@thedti.gov.za 0123945323/5833 0861 843 384 www.thedti.gov.za

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Training Allowance Calculation

INCENTIVE TRAINING ALLOWANCE CALCULATION Section 12i Tax Allowance 12i Calculation based on the lesser of the actual expenditure on training or the average number of Employees x R36k

• Average number of Employees: 100
• Maximum allowance per Employee over 6 years: R36k
• Actual training costs: R3m
• Calculated Training Allowance: 100 x R36k = R3,6m
• Final Training Allowance applicable: R3m

Norma Sali nsali@thedti.gov.za 0123945323/5833 0861 843 384 www.thedti.gov.za