Income Tax Act, 1962 (Act No. 58 of 1962)

Chapter II : The Taxes

Part I : Normal Tax

13ter. Deductions in respect of residential buildings
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(1)        For the purposes of this section—

 

"housing project"

means any project for the erection of a building or buildings in the Republic consisting of or including at least five residential units;

 

"residential unit"

means any self-contained residential accommodation consisting of more than one room (but excluding any hostel, hotel or similar accommodation), the erection of which was commenced by the taxpayer on or after 1 April 1982 and before 21 October 2008 and which was erected under a housing project of the taxpayer—

(a)in order to be let to a tenant for the purpose of deriving a profit for the taxpayer; or
(b)in order to be occupied by a bona fide full-time employee of the taxpayer.

[Definition substituted by section 28 of the Revenue Laws Amendment Act, 2008 (Act No. 60 of 2008)]

 

(2)Notwithstanding anything to the contrary contained in paragraph (ii) of the proviso to section 11(e), there shall, subject to the provisions of this section, be allowed to be deducted from the income of the taxpayer for the year of assessment referred to in subsection (6) of this section and each succeeding year of assessment, an allowance, to be known as the residential building annual allowance, equal to two per cent of the cost to the taxpayer of any residential unit erected by the taxpayer under a housing project of the taxpayer.

 

(2A)For the purposes of this section where a taxpayer completes an improvement as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost to the taxpayer of a residential unit contemplated in subsection (2).

[Section 13ter(2A) inserted by section 32(1) of the Taxation Laws Amendment Act, 2010 (Act No. 7 of 2010)]

 

(3)In addition to the deduction provided for in subsection (2), there shall, subject to the provisions of this section, be allowed to be deducted from the income of the taxpayer for the year of assessment referred to in subsection (5), an allowance, to be known as the residential building initial allowance, equal to ten per cent of the cost to the taxpayer of the residential unit referred to in subsection (2).

 

(4)The allowances under this section shall not be made in respect of any portion of the cost of any residential unit on any premises not owned by the taxpayer, unless the taxpayer at the date on which the erection of such residential unit is commenced, is entitled to the occupation of such premises for a period ending not less than ten years after such date.

 

(5)The residential building initial allowance in relation to any residential unit shall be made for the year of assessment during which such residential unit is for the first time let or occupied as contemplated in the definition of "residential unit" in subsection (1): Provided that if at the end of such year of assessment less than five of the residential units of the relevant housing project have for the first time been let or occupied as contemplated in the definition of "residential unit" in subsection (1). the residential building initial allowance relating to such residential unit shall not be made for that year of assessment but shall be made for the first succeeding year of assessment in which at least five of the residential units in that housing project have been so let or occupied for the first time.

 

(6)The residential building annual allowance relating to any residential unit shall be made for the first time for the year of assessment in which the residential building initial allowance is made in respect of that residential unit.

 

(6A)Where any building in respect of which any deduction of an allowance is claimed in terms of this section was during any previous financial year or years used by the taxpayer for the purposes of any trade carried on by him the receipts and accruals of which were not included in the income of such taxpayer during such year or years, any deduction which could have been allowed during such previous year or years in terms of this section shall for the purposes of this section (excluding the provisions of subsection (7)(a)) be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

[Section 13ter(6A) inserted by section 22(a) of the Revenue Laws Amendment Act, 2000 (Act No. 59 of 2000)]

 

(7)If in any year of assessment any residential unit in respect of the cost of which any allowance has been made to the taxpayer under the provisions of this section, whether in the current or any previous year of assessment, is so used or dealt with by the taxpayer that it ceases to be available either for letting to a tenant or for occupation by an employee as contemplated in the definition of "residential unit" in subsection (1)—
(a)there shall be included in the income of the taxpayer for the year of assessment in which such residential unit is so used or dealt with, the amount of the residential building initial allowance made to him in respect of the cost of such residential unit, less one-tenth of such amount for each completed period of one year, but not exceeding ten years, from the date on which such residential unit was first let or occupied as contemplated in the definition of "residential unit" in subsection (1) until the date on which such residential unit was used or dealt with as aforesaid; and
(b)the residential building annual allowance shall not be made in respect of the cost of the said residential unit for the year of assessment during which such residential unit was used or dealt with as aforesaid nor in respect of any succeeding year of assessment during which it continued to be unavailable for the letting or occupation contemplated in the definition of "residential unit" in subsection (1)

 

(8)The provisions of sections 8(4)(a) and 11(o) shall not apply to so much of the amount of any residential building initial allowance as has been included in the taxpayer's income under the provisions of subsection (7)(a) of this section, whether in the current or any previous year of assessment.

 

(9)No allowance shall be made under this section in respect of so much of the cost of any residential unit as has qualified or will qualify for deduction from the taxpayer's income by way of a deduction of expenditure or an allowance in respect of expenditure under any other provision of the is Act, whether for the current or any preceding or subsequent year of assessment.

 

(10)The aggregate of the allowances allowed or deemed to have been allowed under the preceding provisions of this section in respect of the cost of any residential unit shall not exceed such cost or, if such allowances have been calculated on a portion of such cost, such portion.

[Section 13ter(10) substituted by section 22(b) of the Revenue Laws Amendment Act, 2000 (Act No. 59 of 2000)]

 

(11)Where any company is mainly engaged in the provision of housing facilities for the employees of the sole or principal holder of shares in that company or for the employees of any other company the shares in which are held wholly by the sole or principal holder of shares in such first-mentioned company, the employees of such holder of shares or such other company, as the case may be, shall for the purposes of this section be deemed to be the employees also of such first-mentioned company.

[Section 13ter(11) substituted by section 47 of the Taxation Laws Amendment Act, 2013 (Act No. 31 of 2013)]