Special Economic Zones & Income Tax Benefits

As part of Government’s plan to encourage investment and manufacturing in the economy, Special Economic Zones have been demarcated across the country, with additional zones in planning by Government.  These zones have been identified for economic development and offer tax incentives to attract investment to that area. 

The tax incentives apply to certain types of companies, meeting set criteria and operating within that zone.  With the primary income tax advantage being a lower corporate income tax rate of 15% instead of the standard 28%, this is an incentive worth taking seriously.  To give one a sense of the value of this saving, on a taxable income of R350,000, the saving is R45,500, which is not insignificant by any stretch of the imagination. 

In order to qualify for the lower tax rate, the company is required to meet certain criteria, which include:

1. Incorporation within South Africa or effective management in South Africa.
2. Trading within one of the Zones.
3. Not less than 90% of the business income must be earned from the trade within the Zone.
4. That trade must be conducted from a business located within the Zone. 

Additional criteria apply, including the exclusion of certain types of manufacturing industries as well as certain non-manufacturing industries.  Retail entities, for example, are specifically excluded. 

The Special Economic Zones are currently:

1. Gauteng
   • OR Tambo IDZ
2. Limpopo
   • Musina/Makhado SEZ
3. Free State
   • Maluti-a-Phofung SEZ
4. Western Cape
   • Saldanha Bay
   • Atlantis SEZ
5. Eastern Cape
   • Coega IDZ
   • East London IDZ
6. Kwa-Zulu Natal
   • Richards Bay IDZ
   • Dube TradePort SEZ

As a business planning relocation or a planned start-up, these incentives will prove significant for any qualifying business, but key is to ensure that your business will qualify.  Reach out to our tax consultants for advice on whether your business could qualify for these incentives, and how to access them.  For more on our taxation services, visit https://www.mmsgroup.co.za/income-tax/.