Land ownership in South Africa is a contentious issue and fodder for many debates. However, owning property in South Africa is not just a goal for locals and foreigners are increasingly interested in owning a piece of our spacious living and working areas.
However, because we enjoy relatively easy access to space, capital has been flowing into new office blocks and housing developments, which over years resulted in a degeneration of older areas. As these older areas declined, they soon become the sanctuaries of new migrants and slum landlords, making them unsafe and unsuitable for companies' employees or assets.
In 2003, in an effort to curb the degeneration and contribute to our new democracy’s economic, racial and social integration, National Treasury had developed an amendment to the Income Tax, which would allow tax deductions and incentives within very specific areas the metros and larger municipalities in South Africa, which became known as Urban Development Zones, or UDZs.
The Urban Development Zone tax incentive is aimed at encouraging inner city renewal across South Africa. Any taxpayer – natural or legal persons - may claim the tax benefits of the UDZ incentive. However, David Honeyball, partner at Grant Thornton Cape cautions that this tax allowance has a limited lifespan, which ends in 2020 and that taxpayers could potentially miss out on this incentive if they don’t consider it in their planning.
For non-residents wishing to own a piece of South Africa’s space and beauty, SARS is addressing potential confusion regarding the definition of “immovable property” in the context of determining capital gains tax liability. Donatella Callaway, Senior Tax Consultant Grant Thornton Johannesburg, explains how SARS is intending to clarify this definition and how it may affect foreigners owning property in South Africa.
There are some tax benefits for property owners who are married in terms of SARS’ definition. For example, a married person can deduct the value of all property left to the surviving spouse and the estate will not be liable for the 20% estate duty in that respect. However, in the light of the Davis Tax Committee’s Report on Estate Duty, Tax Partner at Grant Thornton Johannesburg, Doné Howell asks if this is truly constitutional and whether a price can be put on the institution of marriage. An interesting perspective and well worth the read.
The e-taxline Alert circulated at the end of July 2015, summarised the various topics raised in the Davis Tax Committee (DTC)’s Report on Estate Duty. The recommendations contained in this report are open for public comment and much debate from affected sectors is expected.