Guide to the Urban Development Zone (UDZ) Allowance (Issue 8)

SARS has published issue 8 of the Guide to the Urban Development Zone (UDZ) allowance. The sunset date for the UDZ allowance is extended to 31 March 2023.

The core objectives of the allowance are to address dereliction and dilapidation in South Africa’s largest cities and to encourage urban renewal and development by promoting investment by the private sector in the construction or improvement of commercial and residential buildings, including low-cost housing units situated within demarcated UDZs

The guide, amongst others, provides –

(i) general guidance regarding the application and interpretation of the provisions of the Act that pertain to the allowance

(ii) an overview of the income tax consequences associated with the disposal of a building on which the allowance was previously allowed or the ceasing of a taxpayer to use such a building solely for the purposes of that person’s trade; and

(iii) particulars of municipalities that have demarcated areas for purposes of the allowance, as well as the process of demarcation that was followed.

Note that, the urban development zone (UDZ) tax incentive was expected to come to an end on 31 March 2020. However, due to the challenges posed by the Covid-19 global pandemic, a comprehensive review of the effectiveness of the UDZ tax incentive could not be concluded.

In line with the Minister’s announcement in the 2021 Budget Review, it is proposed that changes be made in section 13quat of the Act to extend the UDZ tax incentive by another two years, to 31 March 2023.

Find the Guide to the UDZ Allowance here.