Tax cuts could transform Pietermaritzburg CBD

Buildings in Pietermaritzburg's inner city could be transformed if property owners take advantage of the benefits of a new tax incentive.

The incentive, which for the first time allows owners of commercial, industrial or residential buildings within urban development zones (UDZs) to write off costs for development against their taxable income, was announced by Finance Minister Trevor Manuel in the Government Gazette on June 6.

The Pietermaritzburg UDZ covers the inner city area, comprising 170ha.

Thabani Zulu, Msunduzi municipal manager, said this was the only UDZ promulgated for Pietermaritzburg.

He said it had been structured to include "blighted areas which most need attention, as well as those which will have the biggest impact on attracting investment to the inner city".

The incentive scheme allows any taxpayer, property owner, individual or entity to claim the tax benefits of the UDZ incentive, which takes the form of a tax allowance covering an accelerated depreciation of investment made in either refurbishment of existing properties or the creation of new developments within the inner city, over a period of five or 17 years respectively.

"In the case of the refurbishment of an existing building within the UDZ, an accelerated straight-line depreciation allowance of 20 percent per year of the cost of improvements, over five years, is permitted.

"The refurbishment must preserve a substantial part of the structure or exterior framework and any extensions or additions must be of incidental nature to improvement. In the case of a new building, a write-off period of 17 years is permitted with an initial 20 percent in the first year and an annual 5 percent for the next 16 years."

The incentive covers the costs of construction, demolition, permanent fixtures, water, power, sewage, drainage, waste disposal, access or parking, security, pavements and landscaping.

Mayor Hloni Zondi said that the city had persisted in its endeavours to have the incentive established there, and that 15 workshops had been held to that end.

"We had applied for this in November 2004 and established a good working relationship with those working on the matter at national treasury, although we had to refine our application time after time when it was sent back for amendments to be made."

Zulu said that the municipality was also playing a key role in driving inner city regeneration. He said that by announcing the incentive, the national treasury had made a major contribution to the future of Pietermaritzburg's city centre.

"The UDZ incentive allows for far more private sector investment than before, and makes redevelopment of existing building stock far more attractive for property owners."

He said the Pietermaritzburg Chamber of Business and other interested stakeholders would be familiarised with the process.

Investors need to obtain a certificate of location from the municipality to qualify for the incentive from the South African Revenue Service.

  • This article was originally published on page 1 of The Mercury on June 24, 2005
Article by: Stephanie Saville