SARS Wear and Tear: Useful Lives and the Straight-Line Method

South Africa's depreciation for tax purposes is governed primarily by Section 11(e) of the Income Tax Act, which grants a deduction calculated under the straight-line method using useful lives prescribed in SARS Interpretation Note 47 (IN47). Unlike systems using a single declining-balance rate, IN47 lists specific useful lives for hundreds of asset categories. Motor vehicles are set at 5 years (20% per year), computers and laptops at 3 years (33.3%), office furniture at 6 years (16.7%), photocopiers at 5 years, and air conditioning units at 6 years. The full cost is deducted over these periods regardless of residual or salvage value — unlike IFRS, which subtracts a residual value from the depreciable amount. A South African law firm buying R300,000 in furniture and R150,000 in computers during the 2025 tax year claims R50,000 on furniture and R50,000 on computers — a total R100,000 deduction generating R27,000 in immediate tax savings at the 27% corporate rate.

Section 12C Accelerated Allowances for Manufacturing

Section 12C provides a powerful incentive for manufacturers: a 40% allowance in the first year of use, followed by 20% in each of the next three years. This 40-20-20-20 split applies to new or unused machinery and plant used directly in a manufacturing or similar process. The asset must be new — used assets receive only 20% per year over five years instead. A bottling plant investing R10 million in new filling lines deducts R4 million in year one under Section 12C versus R2 million under standard Section 11(e) — nearly halving the payback period on the tax benefit. The Section 12C accelerated rate is among the most generous manufacturing incentives in Africa and has been used extensively by the food, beverage, and automotive components sectors.

Special Economic Zones and Section 12R Building Allowances

South Africa's Special Economic Zones (SEZs) established under the SEZ Act 16 of 2014 provide a reduced 10% corporate tax rate for qualifying companies, compared to the standard 27%. Section 12R supplements this by offering 10% per year on buildings used in production activities within designated SEZs — double the standard 5% commercial building allowance under Section 13quin. Companies setting up manufacturing operations in SEZs such as Coega (Eastern Cape), East London IDZ, or OR Tambo SEZ can combine the reduced tax rate, accelerated building allowance, and Section 12C machinery deductions to create compelling after-tax economics versus equivalent investments outside the zones. The combination effectively reduces the net present value cost of capital investment by 30–40% compared to standard tax treatment.