The 12I Tax Allowance Incentive, according to Income Tax Act, 1962 (Act No. 58 of 1962) provides an allowance for businesses to implement energy efficiency savings. The savings allow for tax deduction of 95c/kwh saved on energy consumption.

The 12I Tax Allowance Incentive allows tax deduction for all energy carriers (not just electricity) with the exception of renewable energy sources. For the eligibility to claim the deductions, measurements must be kWh equivalent. The verified and measured energy efficiency saving must be over a period of 12 months known as implementation/assessment period which is compared in contrast with the 12 months of baseline measurement. The baseline measurement and savings are verified and measured by a SANAS accredited Measurement and Verification (M&V) Body which assigns an M&V professional.

12I Tax Allowance Incentive Aim

The 12I Tax Incentive seeks to promote Greenfield and Brownfield investments with the objective to boost the productivity of the South African manufacturing sector and increase the productivity of the human capital.

The minimum investment required in qualifying assets is ZAR 50 million for a greenfield project (projects that use only new and unused manufacturing assets) and an additional investment of ZAR 30 million for a brownfield project (expansions or upgrades of existing industrial complexes).

The total investment allowance range between 35% and 55% (or ZAR 350 million and ZAR 900 million) depending on the type of the investment, the status classification, and the localization.

12I tax allowance criteria

  • The minimum investment in Qualifying Assets required is R50 million for a greenfield project and an additional investment of R30 million for a brownfield project.
  • Manufacturing assets to be acquired and contracted for on or after the date of approval. 12I, par. 1 of the ITA

Qualifying Assets

For the purpose of this act Qualifying Assets are defined as:

new and unused buildings and new and unused plant & machinery contracted for and acquired after the date of approval of the Section 12I tax allowance and brought into use within 4 years from the date of approval (implementation period).

Greenfield vs Brownfield Investments

The Dti has divided the Section 12I tax allowance criteria into two groups, the Greenfield investments which are new industrial projects that utilize only new and unused manufacturing assets, and the Brownfield investments which are expansions or upgrades of existing industrial projects.

Should you be interested in applying for the incentive, Dream Team Capital can assist you. Contact us today for professional assistance in streamlining your application for the 12I Tax Allowance Incentive