Urban Development Zone – Tax Incentive to purchase property
In 2008 Cape Town Partnership began collaborating with the City of Cape Town on a shared ten-year vision and workable plan for the turnaround of Cape Town’s central city. The initiative was so successful that the area was enlarged to include Woodstock among other areas. As part of this workable plan the Urban Development Zone was set up as an income tax rebate used to incentivise property development (new builds or renovations) in these areas. The benefit to the purchaser of these developments is that as a taxpayer he can reduce his taxable income, and thus pay less tax to SARS. This depreciation type allowance allows purchasers large deductions from their taxable income and this could result in a reduction of income tax liability or a tax refund. It is in effect a Depreciation Allowance, spread over 11 years. The allowance is calculated on 55% of the purchase price, for new buildings. It is spread over 11 years. Year one – 20% of the 55% Year two to 11 – 8% of the 55% UDZ Tax Allowance Calculation Purchase Price of unit - R 1, 100 000 UDZ Allowance (55% of purchase price) - R 605 000 Year one allowance 20% - R 121 000 Year two to eleven allowance 8% yearly - R 48 400 Total allowance over 11 year period - R 605 000
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February 2021
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