When claiming a  deduction under section 13quat, certain documentation has to be completed.

Top Tip: As a result of the introduction of the eFiling system, it is no longer necessary for the documentation to be submitted with the relevant return of income when claiming a deduction. Instead, the documentation must be retained for audit purposes for a period of five years. 

 
There are certain forms you may need:

• A UDZ 1 form must be completed for each building or part of a building for which a UDZ deduction is claimed by the taxpayer that was erected, extended, added to or improved a building or part of a building. This form is not required in the case of the purchase being a developer.
• A UDZ 2 form must be completed for a purchase of a building or part of a building from a developer.
• A UDZ 3 certificate confirms the particulars of the developer and the development. This certificate must accompany the UDZ2 form.
  • The onus is on the person claiming the UDZ incentive to ensure that the information on the UDZ3 certificate is correct. In the event that the Commissioner has reason to believe that the information provided in the UDZ3 certificate by the developer is not correct, the Commissioner will disallow the UDZ incentive claimed unless they can prove that the information is correct.
• A UDZ 4 form must be completed by developers for each building which is likely to exceed R5 million. This form must be submitted to udz4@sars.gov.za.

Documentation that must be obtained from the municipality

Taxpayers must obtain a location certificate, issued by the municipality, confirming that the building or part of a building that was constructed, improved or purchased from a developer is located within a UDZ within the boundaries of that municipality.

We have detailed all the reporting requirements for both municipalities and developers.

Reporting requirements 

There are two different sets of requirements, those for developers and those for Municipalities.

Developers

In addition to the UDZ3 certificate, any developer that erects, extends, adds to or improves a building within an UDZ of which the estimated cost of the erection, extension, addition or improvement is likely to exceed R5 million must –  

• inform the Commissioner within 30 days after the commencement of that erection, addition or improvement of the estimated costs of the erection, extension, addition or improvements to the building or part(s) of the building which the developer intends to sell and the estimated selling price of the building or those parts; and
• inform the Commissioner within 30 days after the sale of the building or all anticipated sales of any parts of the building have been concluded of the actual costs incurred on that building or parts of that building and the actual selling price of that building or parts of the building.

Municipalities

The following information has to be provided annually by the municipalities to the Minister  

• Reporting requirements for buildings in UDZs:
  • On certificates confirming that a building is located within a demarcated UDZ –
    • the name of every person to which the municipality issued such a certificate;
    • the total number of certificates issued to taxpayers by the respective municipality; and
  • the extent to which a building for which a certificate was issued is used for commercial purposes, residential purposes, low-cost residential units or industrial purposes.
  • On building plans to erect, extend, add to or improve a building or part of a building in each UDZ within a municipality –
    • the number of building plans approved; and
    • the estimated total cost of the erections, extensions, additions or improvements for which such plans were approved.
• Reporting requirements for the regeneration of UDZs:
  • Every municipality must report on the significant fiscal measures that have been implemented by the municipality to support regeneration of each UDZ with such municipality, including –
    • the appropriation of significant funds for developing the area in the annual budget of the municipality;
    • any other fiscal measures for such development; and
    • any non-monetary measures implemented in order to stimulate the regeneration of each zone within the municipality.
• This information must be provided for each financial year of a municipality ending –
  • on or before 30 June, or by 28 September of that particular financial year, in other words, within three months after the end of such financial year.