Company buying property in UDZ zone off plan with the intention to rent out. Will the company also qualify for the UDZ deductions? legislation only refers to individuals and developers.
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
Section 13quat (2)(d) is relevant and reads as follows:
There must be allowed to be deducted from the income of the taxpayer an allowance determined in terms of subsection (3) or (3A), in respect of the cost of the erection, extension, addition or improvement of any commercial or residential building or part of a building which is owned by the taxpayer and is used solely for purposes of that taxpayer's trade, if … in the case where the taxpayer purchased that building or part from a developer –
-
the agreement to purchase was concluded on or after 8 November 2005;
-
that developer has not claimed any allowance under this section in respect of that building or part; and
-
if the developer improved the building or part as contemplated in subsection (3)(b) or (3A)(b), that developer has incurred expenditure in respect of those improvements which is equal to at least 20 per cent of the purchase price paid by the taxpayer in respect of that building or part.
See also the SARS Guide to the Urban Development Zone (UDZ) Allowance (Issue 7).
According to section 1(1) of the Income Tax Act, ‘taxpayer’ means any person chargeable with any tax levied under this Act. A person, as defined, includes a company – see the Interpretation Act.
The developer, in section 13quat(1), also refers to a person.