Foreign investment is welcome where it generates substantial export earnings, creates employment and leads to transfer of technology and skills and access to foreign markets. To encourage foreign investment, effective from 1 January 1994, the government introduced the following incentives:

: dividend remittance threshold for companies established prior to 1979 has been increased from 25 percent to 50 percent of net after tax profits, through the inter bank market.

: dividend remittance for companies set up after May 1, 1993 is now 100 percent and payment is effected through the inter bank market.

: foreign investors may hold up to 100 percent equity in companies operating in preferred sectors of the economy, i.e. those in sectors other than specified in S1 108 of 1994.

: foreign investors may hold up to 25 percent equity in companies which are in reserved areas as specified in S1 108 of 1994.

: in construction and specialised services, foreign investors may hold up to 70 percent equity.

: exporters are entitled to retain 100 percent of their export proceeds with authorised dealers in corporate Foreign Currency Accounts (FCAs).

: investment inflows and capital transfers are eligible for 100 percent deposits into FCAs.

: exemptions from import tax (sales tax), surtax and customs duty on equipment and machinery imported for productive purposes.

: surtax has been reduced from 15 percent to 10 percent.

: for foreign owned companies, local borrowing is permissable on a 1:1 ratio to the shareholder's, funds.

: flexibility in recruitment and engagement of expatriate personnel with maximum contract periods of up to five years.

: investors investing significant sums in ZIC approved projects are eligible to acquire permanent residency, depending on amounts involved.

: 25 percent Special Initial Allowance on cost of industrial and commercial buildings and machinery is granted as a rebate for the first four years.

Incentives for setting up in Growth Point Areas

: 10 percent corporate tax on net profits in the first five years.

:15 percent Investment Allowance on cost of investment.

Incentives limited to locally owned companies (i.e. 75 percent shareholding)

: companies with at least a 75 percent local shareholding which export 75 percent of their output are eligible to utilise switched blocked funds.

It is further advised that foreign investors will be permitted to bring in equity in the form of cash or machinery and equipment. Foreign investors will not, however, be allowed to capitalise (as equity), raw materials, technical and licensing fees and other services. Companies are permitted to import used machinery and equipment for their projects. Such used machinery and equipment (if brought in as part of foreign equity) will be subject to independent evaluation.

Export Processing Zones (EPZs)

The 1994/95 Budget Speech gave incentives for the proposed EPZs as follows:

: corporation tax at 15 percent after a five-year tax holiday;

: exemption from liability to pay withholding tax (NRST) on dividends distributed to nonresidents;

: no liability for branch profits tax on a branch of a foreign registered company operating in an EPZ;

: no liability for withholding tax with regard to dividends (RST) distributed locally by a company licensed to operate in an EPZ;

: exemption from withholding taxes on interest paid, fees;

: remittances and royalties for a person operating in an EPZ;

: duty free importation of raw materials and capital goods;

: no liability for tax on any capital gain arising from the sale of property forming part of an investment in an EPZ;

: for persons employed by a licensed investor there will be exemption from income tax on free benefits, such as housing;

: refund of sales tax on goods and services.

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