South Africa: Special economic zones designated | KPMG | BE
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South Africa: Special economic zones designated, tax benefits in 2018

South Africa: Special economic zones designated

Six special economic zones (SEZs) were approved on 6 July 2018 by the Ministry of Trade and Industry. Companies operating in SEZs may be eligible for a corporate tax rate of 15%.

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Under the SEZ law (February 2016), the Minister of Trade and Industry designated seven SEZs (out of the initial 10 originally identified areas). Of these seven SEZs, six were finally approved by the Minister of Finance.   

 

Companies in the SEZs may be eligible for tax benefits including:

  • A reduced corporate tax rate of 15% 
  • An accelerated 10-year tax allowance on buildings 
  • Value added tax (VAT) and customs duty relief 
  • Employment tax incentives 

 

The criteria for SEZ eligibility include the following:

  • The company is incorporated in South Africa or is a South African tax resident, and conducts business in a designated SEZ.
  • The company conducts business from fixed-base operations within the SEZ, and no less than 90% of the income of that company is derived from the business within that SEZ.
  • The company does not engage in certain manufacturing activities (e.g., related to the production of alcohol, tobacco products, weapons and ammunition or bio-fuels).
  • No more than 20% of the deductible expenditure incurred or 20% of the income received by the entity may be derived from transactions with “connected persons” who are residents.

 

Read a July 2018 report [PDF 115 KB] prepared by the KPMG member firm in South Africa

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