On the main screen if Urban Development is ticked this screen will be available for entry.
The Income Tax Act contains a specific incentive commonly referred to as an “Urban Development Zone (UDZ) claim” – the allowance in section 13quat for the erection or improvement of buildings in urban development zones .
## 1) What the UDZ “urban development” claim is
Section 13quat(2) allows an allowance (deduction) from income in respect of the cost of the erection, extension, addition or improvement of a commercial or residential building (or part) that:
- is owned by the taxpayer and
- is used solely for the purposes of that taxpayer’s trade, and
- is situated within an urban development zone .
An “urban development zone” is an area demarcated by a municipality under the Act and published in the Gazette .
## 2) Key qualifying requirements (high level)
A UDZ allowance is available only if (amongst other requirements):
- The building is situated within an urban development zone .
- The erection/improvement was commenced on or after the relevant Gazette notice date for that UDZ and in terms of a contract formally and finally signed on/after that date .
- The work covers the entire building or at least 1,000 m² floor area .
- If purchased from a developer, additional conditions apply (including that the developer did not claim the allowance and, in certain cases, improvement spend must be at least 20% of purchase price) .
## 3) What “cost” includes/excludes
For section 13quat, “cost” generally means costs actually incurred excluding borrowing/finance costs, and can include demolition, excavation, and certain directly adjoining works (water/power/parking, drainage/security, waste disposal, access/frontage) .
## 4) The allowance percentages (how the deduction is calculated)
Section 13quat(3) provides (summary):
- New building / extension / addition: 20% in the year the building is brought into use, plus 8% in each of the 10 succeeding years .
- Improvement of an existing building where the structural/exterior framework is preserved: 20% in the year brought into use, plus 20% in each of the 4 succeeding years .
For low-cost residential units, section 13quat(3A) provides different rates (including 25% / 13% / 10% for new/extended/additional low-cost units, and 25% + 25% for 3 years for low-cost improvements) .
## 5) Documentation/certificates you must have
No deduction is allowed unless the taxpayer has the required information for submission to SARS, including (notably) a municipal certificate confirming the building is located within a UDZ, and cost particulars (and, where relevant, developer certificates) .
The SARS trust return guide also reflects these UDZ questions (demarcated zone confirmation, municipal certificate, whether erected/improved, purchase from developer, etc.) .
## 6) Timing/sunset date (important)
A deduction under section 13quat is not allowed for a building/improvement brought into use after 31 March 2025 .
12 May 2026
