Tax incentive. Picture: THINKSTOCK
Tax incentive. Picture: THINKSTOCK

Treasury is proposing the extension of the tax incentive for industrial policy projects until end-March 2020, to allow time for it to be reviewed.

The extension is for review purposes only, however, as the R20bn allocation has already been reached.

The incentive, in terms of Section 12i of the Income Tax Act, is managed by the Department of Trade and Industry. It provides for an additional investment and training tax allowance for projects that meet prescribed criteria.

The department will undertake a review of the effectiveness of the incentive.

Treasury director for personal income tax and saving Chris Axelson told Parliament’s standing committee on finance that the limit of R20bn in allocated tax expenditure under the programme had been reached though it would only be realised over time as projects were rolled out.

"In order to allow sufficient time for a review of the industrial policy projects incentive to be completed, it is proposed that the window period should be extended from December 31 2017 to March 31 2020," Axelson said during a Treasury briefing on the draft Taxation Laws Amendment Bill and draft Tax Administration Laws Amendment Bill.

He stressed, however, that while the window period for the tax incentive would be extended under the proposal, the current approval threshold of R20bn in potential investment and training allowances would not be increased, "due to the fact that currently tax revenues are under severe pressure in a fiscally constrained environment".

The additional investment allowances range from 35% to 100% of the cost of any new and unused manufacturing assets used for the project.

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