South
Africa Tax-Efficient Business Forms
Venture
Capital Companies (VCCs) are a relatively new
concept, which allow small and medium-sized
companies and junior mining exploration companies
access to equity finance. Shares in approved
VCCs can be purchased both by retail investors
and by listed companies and their group subsidiaries.
Individuals
are eligible for a 100% deduction of the amount
invested in a VCC in exchange for newly issued
shares, subject to either an annual deduction
limit of ZAR750,000, or a cumulative lifetime
deduction limit, adjusted for recoupments, of
ZAR2.25m.
Listed
companies and their group subsidiaries are eligible
for a 100% deduction of amounts invested in
a VCC on condition that the investment does
not exceed 40% of the VCC’s equity shares.
Investments in excess of the 40% limit are not
tax deductible.
As
at March 1, 2010, only one VCC has so far been
approved by the South African tax authority.
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South Africa Tax-Privileged Business Sectors
Private sector investment in scientific and
technological research and development (R&D)
activities can benefit from a 150% tax deduction
on investment made in the year of assessment.
Additionally, accelerated depreciation of assets
is available – capital expenditure on
R&D assets are deductible over three years:
50% in the year in which the asset was bought,
30% in the following year, and 20% in the final
year.
Businesses
located in industrial development zones (IDZs)
can benefit from duty suspension on imports
for production-related raw materials, including
machinery and assets used in production with
the aim of exporting the finished products,
as well as VAT exemption under certain conditions.
Non-profit
organisations established for the benefit of
the general public are exempt from income tax,
subject to the provisions of the Non-profit
Organisations Act, 1997.
Expenditure
incurred by a farmer to preserve or maintain
land for environmental conservation purposes
is tax deductible, subject to a five-year period
during which such activity has been carried
out. Ordinarily, such expenditure is not regarded
as relating directly to a trade, and is generally
not deductible, but an exception for farmers
was introduced in 2009.
A
film allowance is available to the film and
video sector in respect of production and post-production
costs. Deductions permitted under the allowance
include salaries, legal and accounting fees,
insurance premiums, the cost of acquiring or
creating music and sound effects, and interest
and finance charges incurred.
Small
businesses can benefit from choosing the Turnover
Tax system, which is a simplified method of
calculating corporate income tax – see
under Domestic Corporate Tax: Income Tax Rates.
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