SA further incentivises urban renewal taxes
On Wednesday, the City of Johannesburg’s Urban Development Zone (UDZ) announced the benefits brought about by the new UDZ tax incentive amendments that extend access to these two investor groups. The UDZ is an urban renewal tax deduction launched by the National Treasury in 2003 and amended in 2006 to encourage the refurbishment and construction of commercial and residential properties in South Africa’s major cities.
The UDZ tax incentive comes in a form of accelerated depreciation on the costs of either new buildings, renovation of existing buildings or the purchase of buildings in the designated Inner City of Jo’burg. For newly constructed buildings, the deduction amounts to 20 percent of the construction costs in the first year of operation and 5 percent annually in the following 16 years. For renovated buildings, the deduction amounts to 20 percent of the renovation costs deducted annually for 5 years.
Speaking at the breakfast function, Councilor Parks Tau expressed the city’s strong commitment to the successful implementation of the UDZ tax incentive in Johannesburg.
Councilor Tau said: “The commitments of the Jo’burg City Council to the regeneration of the inner city of Johannesburg are embodied in the mayoral priorities such as economic growth and job creation; health and community development; housing and services; creating a safe, clean and green City; a well governed and managed City as well as HIV/Aids.” He also referred to the Inner City Summit that is planned for early 2007 and called for partnership and participation by all stakeholders.
The City of Jo’burg wishes to encourage investors to take advantage of the new amendment in order to turn the city into a world-class African city.
The amendments include tax deductions for investors that redevelop or purchase renovated buildings in South Africa’s inner cities. For purchasers of refurbished buildings or parts of renovated buildings, 30 percent of the purchase price is deemed to be the cost for depreciation under the UDZ legislation. For purchasers of newly constructed buildings or parts of such buildings, 55 percent of the purchase price is deemed to be the cost for the UDZ purposes.
“The momentum for flow of investment has increased”, said Lebo Ramoreboli, Project Consultant for Economic Area Regeneration in the City of Johannesburg. “Since June this year we have approved and completed 41 projects with a combined value of R574mn ($80mn), ” She continued: “The cumulative total value of all projects registered with the City of Jo’burg since UDZ’s promulgation in October 2004, stands at R1.622bn, passing the R1bn milestone we celebrated in May this year. With this new amendment we are bound to attract more investors to shape conditions for accelerated local economic growth that is sustainable and ensures that benefits and opportunities are equitably spread to all of Joburg’s citizens,” she concluded.
However, it was not all good news. Yael Horowitz, manager of planning and strategy at the Johannesburg Development Agency, said that although success had been great in the west of the UDZ, it was proving difficult to renew areas in the east and north. She added that developing these areas was critical to establishing an inner-city wide inter-modal transport network. -Business in Africa Online
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