DTI clarifies Manuel’s IDZ duty provisions

Not all goods and services entitled to zero-rating ED RICHARDSON
SOME CLARITY has emerged after finance minister Trevor Manuel announced in his budget speech that there would be no special VAT provisions for the country’s Industrial Development Zones (IDZs) According to Francois Truter, investment services director of the enterprise development division at the Department of Trade and Industry (DTI), South Africa’s Industrial Development Zones (IDZs) were never designated as customs-free zones or special import zones. “Duty (tax) free status (referred to as a duty relief scheme) in IDZs takes several forms and the RSA (Republic of South Africa) model is an acceptable international model. There are successful examples of the RSA model in the world,” says Sibusiso Sibandze, customs and logistics project manager at the Coega Development Corporation (CDC). He added that the CDC would continue to provide value for investors through an investment environment, “which includes but is not limited to tax treatment”. The tax exemption limits follow Trevor Manuel’s 2006/07 budget speech announcement that not all goods and services entering IDZs would be entitled to a zero-rated tax exemption. “However, this zero-rating needs to be limited so that it does not apply to goods or services artificially routed through the CCA or to goods or services that are not economically used, consumed or transformed in the CCA,” said Manuel. The IDZs allow a zero rate tax on goods that are procured from SA sources and duty free importation of production-related raw materials and inputs. The DTI allows Customs Secured Areas exemption from duties, VAT and import duty on machinery and assets. Truter explained that proper control measures would be featured at all IDZs. This included software and controlling systems to monitor and inspect goods entering the CCA. The CDC is busy designing information and communication technology enabled systems for this. “It must be emphasised that a similar system exists presently in the RSA. Both internally and with the BNLS countries (countries within the Southern African Customs Union),” said Sibandze Declaring an area a CCA will also depend on global and industry standards. The aluminium smelter at Coega, which is currently awaiting a decision from Alcan for the go-ahead, would be zero-rated as per global standards, while textile factories in the IDZs will be defined as CCA.