Any person will be eligible to claim UDZ tax incentive if they meet the following requirements relating to a building:
- Building requirement
- UDZ requirement
- Trade requirement
- Owner requirement
- Date requirement
To qualify for a deduction under section 13quat, a person must have:
- erected an entirely new commercial or residential building;
- extended, added to or improved an existing commercial or residential building or part of such a building representing a floor area of at least 1 000 m2; or
- purchased a building or part of a building directly from a developer that –
- has erected, extended, added to or improved either an entire building or a part of a building representing a floor area of at least 1 000 m2;
- has not previously claimed any UDZ deduction on the building or part of a building; and
- in the case of the improvement of a building or part of a building, has incurred expenditure on these improvements which is equal to at least 20% of the purchase price paid by the purchaser for the building or part of the building.
The building or part of the building must be within a UDZ.
To find out the areas which are UDZ look at the Government Gazette notices on www.treasury.gov.za.
Below is a list of the dates of the Gazettes by region to help you find them.
|Municipality||Date of Gazette||Gazette Number||Notice Number|
|Buffalo City||10 December 2004||27077||1432|
|City of Cape Town||14 October 2004||26866||1156|
|City of Cape Town, Maitland||27 February 2013||36195||147|
|Ekurhuleni||6 June 2005||27656||535|
|Emalahleni||12 May 2006||28795||416|
|Emfuleni||10 December 2004||27077||1432|
|Emfuleni (additional demarcation)||17 December 2014||38345||1038|
|eThekwini Metro||10 December 2004||27077||1432|
|Johannesburg Metro||14 October 2004||26866||1156|
|Mangaung||10 December 2004||27077||1432|
|Matjhabeng||14 July 2006||29010||669|
|Mbombela||10 December 2004||27077||1432|
|Msunduzi||6 June 2005||27656||535|
|Nelson Mandela Bay||6 June 2005||27656||535|
|Polokwane||6 June 2005||27656||535|
|Sol Plaatje||10 December 2004||27077||1432|
|Tshwane Metro||10 December 2004||27077||1432|
The building must be within a UDZ and must be used solely by the taxpayer for purposes of trade. There is no one test as to when it can be said that a taxpayer has commenced to carry on a trade and each determination will depend on the specific facts and circumstances. A taxpayer that ceases to trade will no longer be able to claim the UDZ incentive on the property from the year following the year of assessment in which the trading activities cease. Furthermore, if a taxpayer does not claim the deduction in the year that trading commences or in subsequent years but wants to start claiming in, for example, year three, the deduction for the first three years will be forfeited. In these cases, only the remaining portions of the deduction will be available to the taxpayer.
The building or part of the building that was erected, extended, added to or improved must be owned by the person claiming the UDZ incentive. This means that a person who leases a newly constructed building from another cannot claim the incentive for any costs incurred in extending, adding to or improving the building as the lessee is not the owner of the building.
For more information, please read ‘land owned by third parties’.
The erection, extension, addition to or improvement of the building must have commenced:
- on or after the date on which the Minister has published the particulars of the relevant demarcated area within which the building is located in the Gazette; and
- in terms of a contract formally and finally signed by all parties on or after that date.
It is also required that the purchase agreement must have been concluded on or after 8 November 2005.
The building or that part of a building must have been brought into use solely for the purposes of the taxpayer’s trade on or before 31 March 2023.