Urban Development Zones Home Page

Click on the links to view or download the documents

• UDZ Map
• Selected Provisions of UDZ Legislation
• Registration Form
• Location Certificate
• SARS Forms:
• UDZ 1 Deduction claimed in terms of Erection or Extension 
• UDZ 2 Purchase of a building/part of a building within an Urban Development Zone  
• UDZ 3 Developer Certificate
• UDZ 4 Developer Information

Background to the Urban Development Zone (UDZ) and the Tax Incentive

In 2003 Government introduced a new tax incentive which established Urban Development Zones (UDZ) in selected South African cities, including one in the eThekwini Municipality (Durban).

The Income Tax Act (58 of 1962) now permits property owners and/or developers to write-off building costs against the income of businesses in the promulgated UDZ areas.  The details of the amendment can be found in section 33 (7) of the Revenues Law Amendment Act (45 of 2003) including section 13 quat - Deductions in respect of erection or improvement of buildings in urban development zones.

The legislation was further amended in 2005 (Revenue Laws amendment Act 31 of 2005) to accommodate taxpayers who purchase buildings or parts thereof, for example sectional title units, directly from developers.

The aim of the UDZ tax incentive is to regenerate and revitalise urban areas and business districts, thereby stimulating economic development and creating opportunities for the urban poor.  The incentive does this through encouraging capital investment in buildings in the UDZ defined urban areas.

The UDZ approved for eThekwini Municipality

The UDZ area for the eThekwini Municipality, approved by council and published in Gazette number 27077, consists of the greater CBD and it is described as:

• The area bounded by Bell Street in the south through to Shepstone Rd, Victoria Embankment, Alexandra Street, Berea Road, Carters Avenue, Canongate Road, Warwick Avenue, Centenary Road, Carlisle Road, First Avenue, Stamford Hill Road, Croydon Road.  Walter Gilbert Road, Cobham Road, Old Fort Road, NMR Avenue, Somtseu Road, Stanger Street, Argyle Road, NMR Avenue and Walter Gilbert Road in the north.

See UDZ Map

General operations and procedure

No tax deduction shall be allowed, unless the taxpayer has submitted the following documentation to SARS, together with the relevant tax return in which the deduction is claimed:

• A UDZ Location Certificate obtained from the municipality confirming that the building is located in an approved UDZ,
• An occupancy certificate obtained from the municipality,
• A completed UDZ 1 form (building erected, extended, added to or improved) or  UDZ 2 form  (building purchased directly from developer). 
• Where a building or part of a building is purchased from a developer, UDZ 3 form must be completed by the developer that constructed or improved the building or part of the building. 

The developer must confirm that:

• the erection or extension of, addition to or improvement of the building or part of the building was commenced by the developer on or after the date of publication of the particulars pertaining to the demarcation of the relevant area in which the building is located, in terms of a contract formally and finally signed by all parties thereto on after that date;
• the construction or improvement by the developer covered the entire building or at least a floor area of 1 000 m²;
• the developer has not claimed any UDZ allowance in respect of the building or part thereof;
• a certificate of occupancy has been issued by the relevant municipality in respect of the building or that part of the building; and
• in the case of the improvement of a building or part of a building, the 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 the building or part of a building. 
• If the estimated costs to be incurred by the developer in erecting a new building or refurbishing an existing building, which he intends to sell,  is likely to exceed 5million rand, UDZ 4 form is completed. Part A of the form is completed and submitted within 30 days after the commencement of construction or refurbishment of the building or part of the building and part B is submitted within 30 days after the sale of the building or parts of the building.

UDZ  forms are also available from SARS offices.

On requesting a UDZ location certificate from a municipality, the taxpayer will be requested to supply certain information to the municipality.  The municipality will then issue a location certificate to certify that the relevant building falls within the UDZ area. The location certificate, occupancy certificate and the relevant UDZ form must then be submitted with the taxpayer’s relevant tax return to SARS in order to claim the deduction.

Investors are also required to complete and submit the UDZ Registration Form to the municipality together with the building plans being submitted for approval. The UDZ form gives a preliminary confirmation that the building is located within the UDZ and serves to alert the municipality and SARS of the number of construction projects soon to be undertaken or are currently underway within the UDZ.

Time frames

The incentive became effective in respect of a UDZ when the particulars of the demarcated area were published in the Gazette, that is, the 10th of December 2004 in the case of the eThekwini Municipality.

The 2005 Revenue Laws Amendment Act identified the 31st of March 2009 as the end date for bringing any building located in a UDZ into use for purposes of claiming the incentive. However, this date will not affect those taxpayers who would have started claiming their UDZ deductions.

The effective date for the 2005 amendments is 1 February 2006, except for the provision that relates to purchase of building or part of building from the developer. In this case the act states that the purchase agreement must have been concluded on or after 8 November 2005.