VLA Budget Booklet 2021/2020

Penalties will apply where an employer claims the ETI for nonqualifying
employees, or when a current employee is displaced in
order to employ a qualifying employee.
GOVERNMENT GRANTS
Certain grants, subsidies or contributions by the government are
exempt from income tax if listed as an exempt grant in the 11th
Schedule of the Income Tax Act, or identified as such by the
Minister of Finance in a notice in the Government Gazette.
The list of exempt grants include, amongst others, grants received
from the DTI and DST in terms of:
• The Automotive Investment Scheme and Automotive
Production and Development Programme
• The Manufacturing Competitiveness Enhancement
Programme
• The Clothing and Textiles Competitiveness Programme
• Export Marketing and Investment Assistance.
Where an exempt government grant is secured for the acquisition
or creation of an asset, the cost of the asset must be reduced by
the amount of the grant as follows:
• If the asset relates to trading stock the cost price deduction
claimed when the stock is sold, is reduced
• If the asset relates to an allowance asset the base cost of
the asset must be reduced and any tax allowances must be
calculated on the reduced cost.
• If the asset relates to a capital asset which does not qualify for
any tax allowances the base cost of the asset must be reduced.
Where a government grant is received or accrued and not used to
acquire trading stock or an asset, any other deductible operating
expenses must be reduced by the portion of the grant not used to
acquire trading stock or assets. This rule applies to all deductible
expenses incurred, and not only those expenses linked to the
government grant. If the grant received in any one year is more
than the expenses incurred the excess is carried forward and
reduces expenses in the next year of assessment.
RESEARCH AND DEVELOPMENT
A company can qualify for a 150% tax deduction in respect
of research and development expenditure incurred if the
research and development relates to systematic investigative or
experimental activities of which the result is uncertain, for the
purpose of:
• discovering new non-obvious scientific or technical
knowledge; or
• creating or developing an invention, patent, design or
computer copyright or
• significantly improving any of the above.
The company must apply for approval from the Minister of Science
and Technology before the deduction may be claimed.
Plant and machinery acquired and brought into use for the
first time after 1 January 2012 for purposes of research and
development qualify for a capital allowance on a 50:30:20 basis,
and buildings used wholly or mainly for research and development
qualify for a 5% annual allowance. The incentive in its current form
will expire on 1 October 2022.
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