Urban development zone
What is the UDZ?
Urban Development Zone, known as UDZ is a tax incentive that was introduced to the Income Tax Act in 2003 with the objective of rejuvenating inner city nodes through capital injection in the form of investment. Much of Woodstock, Salt River and the inner CBD allow for attractive investment opportunity through the UDZ initiative.
UDZ allows the purchaser, as a registered tax payer, the opportunity to reduce their taxable income that is owed to SARS. This benefit is utilized as a depreciable allowance over an 11 year period.
How does the UDZ work?
UDZ is calculated on 55% of the purchase price of an apartment if the building is a new development and 30% of the purchase price if it is a re-developement (improvement).
An allowance of 20% of the 55% is realized in year 1 and 8% thereafter for 10 years. The tax allowance is recovered on the sale of the apartment for an amount greater than or equal to cost, which can be deferred for as long as the owner holds the property.
• UDZ allowance is calculated over 11 years
• Allowance in year 1-20% of the 55%
• Allowance from year 2 to 11-8% per annum
A new sectional title unit is bought directly from a developer. The building where this unit was purchased in is a new building. The tax allowance will work as follows:
The following material was provided as a very basic guide to familiarizing a buyer with the UDZ tax incentive and is for information purposes only . There are a number of requirements that need to be met in order to benefit from the UDZ allowance. The basic example provided is generic and may not apply to your circumstance. The development company nor its representatives or affiliates will not be held accountable for UDZ calculations or queries. Please consult with the Guide to the Urban Development Zone (UDZ) Tax Incentive and your tax advisor for more information and advice prior to concluding a transaction.