How do we treat purchases from a developer?

 
A taxpayer may claim an Urban Development Zone (UDZ) tax incentive on the “purchase price” paid to a developer for the acquisition of a UDZ building or part of a UDZ building.
 
Under section 13quat(1), “purchase price” in relation to any building or part of the building that is purchased by a taxpayer from a developer means the lesser of –
 
a. The actual cost to the taxpayer to purchase that building or part; or
 
b. The cost which a person would have incurred had that person purchased that building or part under a cash transaction concluded at arm’s length on the date on which that taxpayer purchased that building or part; he cost which a person would have incurred had that person purchased that building or part under a cash transaction concluded at arm’s length on the date on which that taxpayer purchased that building or part.
 
In the event of a purchase of a building or part of a building from a developer – 
 
  • 55% of the purchase price of that building or part of a building, in the case of a new building erected, extended or added to by the developer; and
  • 30% of the purchase price of that building or part of a building, in the case of a building improved by the developer,
will be deemed to be costs incurred by the person for the erection, extension, addition to or improvement of the building or part of the building.
 
These costs will be regarded as costs for purposes of the UDZ incentive and no further adjustments will have to be made in this regard. The purchaser of a building or part of a building will thus qualify for a UDZ incentive on the “deemed costs” pertaining to such a building or part of a building.
Last Updated: 14/12/2018 1:59 PM     print this page
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