The Urban Development Zone Tax Incentive
WHAT IS IT?
The Cape Town UDZ tax incentive is a SARS administered tax incentive encouraging residential and commercial development in certain specified areas in Cape Town, in which WEX1 and WEX2 will be located. The tax incentive offers property owners a tax deduction against taxable income over eleven years and could act as a deferment of tax payable until the unit is sold.
HOW DOES IT WORK?
The purchaser of a redeveloped residential unit located in the UDZ will be able to claim an income tax allowance. 55% of the purchase price is deductible. The tax allowance is claimed over eleven years at a rate of 20% in the first year and 8% in the succeeding ten years. The tax allowance is recouped 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.