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ICD What's New

South African SEZs and tax incentives overview
Kind: ICD What's New  Organization: Department of International Cooperation  Publish Date: 2018-12-28 08:58
SEZ in South Africa:
Under South Africa's Special Economic Zone Act proclaimed in 2016, eight SEZs have been designated in the country's various provinces so far. These include Coega IDZ and East London IDZ in Eastern Cape, Richards Bay IDZ and Dube Tradeport SEZ in Kwazulu-Natal, Saldanha Bay IDZ in Western Cape, Maluti-a-Phofung SEZ in Free State, Or Tambo IDZ in Gauteng, and Musina-Makhado SEZ in Limpopo. In addition, work is under way between the Department of Trade and Industry (the dti) and the provinces on the planning and implementation of new SEZs, including Nkomazi SEZ in Mpumalanga, Atlantis SEZ in Western Cape, and Bojanala SEZ (also known as the Platinum Valley SEZ) in North West. As of the end of the second quarter of 2018, South Africa's SEZ program had managed to draw US$814.5 million in private investment into the zones, with a total of 115 companies having set up operations in them.

Tax incentives
Various tax incentives are provided to businesses operating in the SEZs, including employment tax incentives, a reduced corporate rate of 15 percent instead of the current 28 percent, VAT and customs relief, and a building allowance. To be eligible for the incentives, a business must be incorporated in South Africa or be a South African tax resident, and must be located in an SEZ. In addition, at least 90 percent of the company's income must be derived from its business within the SEZ. Also, no more than 20 percent of the deductible expenditure incurred or 20 percent of the income received by the entity may be derived from transactions between residents who are connected persons. The following types of businesses are not eligible for the incentives: producers of (1) spirits and ethyl alcohol from fermented products and wine (SIC code 3051), (2) beer and other malt liquors and malt (SIC code 3052), (3) tobacco products (SIC code 3060), (4) arms and ammunition, and (5) bio-fuels whose manufacture negatively impacts food security in South Africa.

SEZ overview:
Coega IDZ is the largest in southern Africa. It has attracted enterprises in a range of industries, including agro-processing, automotive, aquaculture, energy and logistics. A major portion of the business in the Richards Bay IDZ is export-oriented -- the IDZ links the province's two major ports, Durban and Richards Bay, and connects with Mozambique and areas of East Africa. Saldanha Bay IDZ is envisioned to serve as the primary oil, gas and marine repair engineering and logistics services complex in Africa. Dube Tradeport SEZ is home mainly to businesses in the automotive, electronics and fashion garment sectors, as well as to Dube Agrizone, which focuses on high-value-added agro products. Musina-Makhado SEZ is strategically located along the route into the Southern African Development Community (SADC), very close to the border with Zimbabwe. The zone's infrastructure supports industries in the full-value chains for mineral beneficiation, agro-processing and light industrial manufacturing.

Resources:
1.South African Special Economic and Industrial Development Zones, the South African Department of Trade and Industry
2.President Cyril Ramaphosa: Launch of Atlantis Special Economic Zone https://www.gov.za/speeches/president-cyril-ramaphosa-launch-atlantis-special-economic-zone-6-dec-2018-0000
3.Operating in a SEZ? Nene has given the green light for tax deductions, KPMG https://home.kpmg.com/content/dam/kpmg/xx/pdf/2018/07/tnf-southafrica-july10-2018.pdf
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Update: 2019-06-17
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