Urban Development Zones - Background, Overview & Application Forms
Background to the UDZs and the Tax Incentive.
At the end of 2003, a tax incentive in respect of the erection, extension, addition or improvement of buildings demarcated within Urban Development Zones (UDZs) in selected cities of South Africa, including Pietermaritzburg, was signed into law.
The Income Tax Act (No. 58 of 1962) now permits owner/developers to write off costs of refurbishment and/or new development in demarcated UDZ areas. The Income Tax Act has been amended through the promulgation of section 33 (7) of the Revenues Law Amendment Act (45 of 2003) and inserts section 13 quat, i.e. 'Deductions in respect of erection or improvement of buildings in urban development zones'.
The UDZ tax incentive is directed at the stimulation of the regeneration of declining urban areas, in targeted inner city areas across South Africa, and the encouragement of economic development.
The Promulgation of the UDZ.
With the demarcation of the UDZ by the Minister of Finance in the Government Gazette No. 27656, on 6 June 2005, owners of land and buildings in such demarcated UDZ area may apply for the tax incentive. The incentive applies to any refurbishment or new building projects within the UDZ.
The UDZ approved for Pietermaritzburg.
The Pietermaritzburg UDZ covers a portion of an area known as the Inner City, comprising about 170 hectares. This demarcated area within the Inner City has been promulgated as the only UDZ for Pietermaritzburg.
The Pietermaritzburg Inner City UDZ.
The proposed UDZ of 170 hectares in extent and has been structured in such a way as to include those blighted areas which most need attention, as well as those which will have the biggest impact on attracting investment to the inner city.
A full map and description of the Inner City UDZ is attached to Page 2 of the document you can download below. It is important for the taxpayer to ensure that the property to be developed or refurbished is within the Inner City UDZ.
Who is eligible for the UDZ tax incentive?
Any taxpayer-owner, user, and lessor of a building within the UDZ can qualify for the incentive. If you own a property for investment purposes in an individual capacity, the tax allowance may be offset against your personal taxable income, so long as you do not use the premises for personal purposes.
How does the UDZ tax incentive work?
Deductions shall be allowed from the taxpayer's income in respect of the cost of the erection, extension, addition, or improvement, if the building is used for that taxpayer's trade and if:
• Building and/or improvement operations were commenced by the taxpayer, and/or the contract for construction was formally signed, on or after the date of promulgation of the UDZ.
• An occupancy certificate, in terms of the National Building Regulations, was issued by the municipality, on completion of the construction work.