Few Cape Town developers cashing in on inner city tax rebate scheme

transfer pricing 101Author: Bekezela Phakathi (BDlive)

There have been few takers of the Urban Development Zone tax incentive in Cape Town.

The scheme also appears to have done little to boost the availability of affordable housing in the city’s CBD.

The scheme, introduced in 2003, is an incentive administered by the South African Revenue Service (SARS) aimed at revitalising inner city areas by attracting capital investments in commercial and residential property through a tax rebate.

However, the Cape Town Central City Improvement District, a private-public partnership that provides complementary urban management services to parts of the inner city, said most developers seemed oblivious to the tax incentive scheme.

Improvement district chairman Rob Kane said although the partnership had spread the word, “apart from a few buildings … uptake has been slow”. Portside, one of the few buildings that has capitalised from the deal, cost R1.6bn to build and its owners were able to write off 20% of that price tag in the first year and 8% per year in the remaining 10 years.

Mr Kane said part of the reason developers were not taking advantage of the tax scheme might be because they were not aware that SARS had extended it to March 31 2020.

In addition, those in a position to advise developers did not seem to be divulging information about the incentive, he said.

“We also believe that, in terms of residential development, many developers may not be aware the (scheme) applies equally to this category of property, be it refurbishments or greenfield developments,” Mr Kane said.

Sean Dayton, a corporate lawyer at Bowman Gilfillan, said there appeared to be a comparative lack of uptake for residential development. “Thus far there have been no low-cost housing developments within the Cape Town urban development zone that have made use of the incentive, despite the fact that it offers the greatest allowance to developers of low-cost residential units, he said.

“A healthy supply of residential accommodation close to the economic opportunities of the inner city will keep prices affordable, create economies of scale in the use of public transport and utilities, and open up new business opportunities,” Mr Dayton said.

The City of Cape Town said it would respond to queries on Monday.

This article first appeared on bdlive.co.za.