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Welcome to the UDZ TAX INCENTIVE CONFERENCE Day 3 20 Aug 05

Welcome to the UDZ TAX INCENTIVE CONFERENCE Day 3 20 Aug 05. UDZ Tax Incentive – Presentation at the Joburg UDZ Conference & Exposition: August 20, 2005. By: Lebo Ramoreboli, Project Consultant – Economic Development, Tourism & Marketing, City of Johannesburg.

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Welcome to the UDZ TAX INCENTIVE CONFERENCE Day 3 20 Aug 05

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  1. Welcome to the UDZ TAX INCENTIVE CONFERENCE Day 3 20 Aug 05

  2. UDZ Tax Incentive – Presentation at the Joburg UDZ Conference & Exposition: August 20, 2005 By: Lebo Ramoreboli, Project Consultant – Economic Development, Tourism & Marketing, City of Johannesburg Finance & Economic Development

  3. Joburg UDZ demarcation • Approved area commonly known as the Inner City

  4. Inner City Locations within UDZ • The core CBD and high density residential areas of the inner city. • Braamfontein, Newtown, Hillbrow, Berea, Yeoville, Bellevue, Troyeville, Bertrams, Ellis Park, Fordsburg, Pageview, Benrose and a number of other areas graphically depicted in the Map

  5. Eligibility • Property owners of commercial, industrial and residential buildings located in Inner City who either: • Substantially refurbish their premises or • Demolish their buildings and construct new ones on the premises • Property owners living on the premises who refurbish or construct granny flats or similar facilities for income generation

  6. Computation of Deductible Amounts • Annual tax deductions or accelerated depreciation amounts are computed as follows: • For refurbishment of existing buildings, 5-year straight line depreciation or 20% of investment annually • For new buildings, 20% of investment in yr 1, and 5% in 16 years subsequent (= 17 years amortization)

  7. Computations • Deduction can be made on all taxable income including income from sources other than buildings in UDZ, e.g. Salaries from other employment, extraordinary income • Applicable in cases where improvement or new construction commenced on or after proclamation date

  8. Costs covered under UDZ tax incentive • Construction costs • Demolition of existing buildings • Permanent fixtures adjoining the site • Water, power, sewage,drainage, waste disposal • Access or parking • Security (fence, cameras, surveillance equipment, etc.) • Sidewalks • Landscaping as part of development • Painting

  9. Benefits to Private Investors • Highly innovative accelerated depreciation deductible from all taxable income (including personal income tax). • Corporate and small investors can now reclaim their income generating-buildings which might have declined or degenerated, renovate them and access the Incentive • New prospective investors can also buy buildings for income-generating purposes, to renovate or replace them with new structures and still derive the tax benefit  

  10. Example: Comparative scenarios: With and without UDZ tax Benefit: Assumptions • Refurbishment investment = R2.0mio • 4 blocks of flats comprised of 10 units each, I.e.,40 units. Rental at R2,000 per month for 12 months • Income before depreciation & tax = R R476,000.00 • Depreciation of R2.0 million refurbishment investment at 20% per annum for 5 years • 30% Company Tax

  11. Results • Income in both Scenarios = R 960,000.00 • 20% annual depreciation = R 400,000.00 • Taxable income without udz incentive = R 476,000.00 • Taxable Income with udz incentive = R 76,000.00 • Tax expense without udz incentive = R 142,800.00 and R 22,800.00 with udz incentive • Net tax saving with udz incentive =R 120,000.00

  12. General operational procedures • Investors have to complete and submit registration form provided by council ASAP • When construction is complete, fill in application for location certificate • Submit location certificate and prior obtained occupancy certificate with SARS, tax returns for statutory tax assessment • SARS is developing an appropriate certificate for UDZ tax incentive beneficiaries which will be available soon

  13. Existing supportive investment climate • Recent and on-going public investments e.g. Newtown, Constitution Hill, Main street precinct, Standard Bank parking complex, ABSA, etc. • Establishment of Business Improvement Districts i.r.o supplementary urban management • Collaboration among council agencies, private sector • Anticipated initiatives e.g. 2010 Soccer World Cup, Gautrain & Park station development

  14. www.joburg.org.za/udz Lebo Ramoreboli Project Consultant (Area Regeneration) Finance & Economic Development City of Johannesburg Cell: +27 (0)82 372 3174 Tel: +27 (0)11 358 3437 Fax: +27 (0)11 358 3444 E-mail: lebor@joburg.org.za For Further Information

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