The amounts that can be deducted

Depending on the type of development involved, that is, new, improved or low-cost, the UDZ incentive allowance is calculated at a different rate.
 
Let’s consider these different types:
 
  • The erection of a new building or the extension of or addition to any building
    • An amount equal to 20% of the cost relating to the erection or extension of or addition to, the UDZ building in the year of assessment during which the building or part of the building starts to be used by the taxpayer solely for the purposes of that person’s trade. In the event that land is purchased on which a building is erected, the UDZ incentive is only worked out on the cost of the erection (excluding the cost of the land).
Top Tip: The allowance can only be claimed from the year of assessment in which the building or part of the building is brought into use by the taxpayer for trade purposes, not the year of assessment in which the expenditure is incurred or when the building or part of the building is complete.
 
    • An amount equal to 8% of the cost in each of the following 10 years.

  • The improvement to an existing building or part of a building which preserves the existing structural or exterior framework:
    • An amount equal to 20% of the costs of the improvement of the building in the year of assessment during which the improved part of the building begins to be used by the taxpayer solely for the purposes of trade. No apportionment is required in case the building is brought into use during the year of assessment.
    • An amount equal to 20% of the cost in each of the four following years of assessment.

  • The erection of a new building or the extension of or addition to any building to the extent that it relates to a low-cost residential unit
    • A “low-cost residential unit” is defined as –
      • an apartment qualifying as a residential unit in a building located within the Republic, where—

(i) the cost of the apartment does not exceed R350 000; and

(ii) the owner of the apartment does not charge a monthly rental in respect of that apartment that exceeds one per cent of the cost; or 

    • A building qualifying as a residential unit located within the Republic, where

(i) the cost of the building does not exceed R300 000; and

(ii) the owner of the building does not charge a monthly rental in respect of that    building that exceeds one per cent of the cost contemplated in subparagraph (i) plus a proportionate share of the cost of the land and the bulk infrastructure:

      • Provided that for the purposes of paragraphs (a)(ii) and (b)(ii), the cost is deemed to be increased by 10 per cent in each year succeeding the year in which the apartment or building is first brought into use;
    • The incentive for low-cost residential units is determined on the following basis:
      • An amount equal to 25% of the cost of the erection or extension of or addition to a low-cost residential unit in the year of assessment during which the unit so erected, extended or added to is brought into use by the taxpayer.
      • An amount equal to 13% of that cost in each of the five succeeding years of assessment.
      • An amount equal to 10% of that cost in the seventh year of assessment.

  • Improvements to an existing building or part of a building, to the extent that it relates to a low-cost residential unit. These are worked out as follows:
    • An amount equal to 25% of the costs of improvement of the low-cost residential unit in the year of assessment during which the part of the unit so improved is brought into use by the taxpayer.
    • An amount equal to 25% of that cost in each of the three succeeding years of assessment.
Last Updated: 14/12/2018 1:59 PM     print this page
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