Making improvements to your commercial property isn’t just a good business decision – it’s essential to keep your building’s occupancy rate high.

While most building owners appreciate the importance of renovations and adding new sections to their buildings, the costs involved can’t be ignored. The good news is that a portion of these costs can be claimed back from SARS – provided that you follow the right procedures.

In this article, we’ll take a closer look at the tax rebates available to commercial property owners.

Rebates: the silver lining behind SARS

Dealing with the taxation authorities isn’t usually something business people relish, but when it comes to tax allowances, there’s a good reason to get to know SARS a bit better.

The Income Tax Act of 1962 makes provision for commercial building owners to claim part of the costs of building improvements as a tax refund. SARS issued an interpretation note (IN107) in 2018, clarifying the process that should be followed.

While it’s always best to consult your accountant or tax consultant when requesting an allowance, here is a brief summary of what’s involved.

Commercial property buyers can claim up to 5% of the sale price of the building from SARS, provided that the following conditions are met. In tax jargon, this is known as a s13quin claim.

  • The construction, purchase or improvement must have been completed after 1 April 2007. This should cover virtually all new commercial buildings on the market today.
  • A claim can only be made with respect to a new and unused commercial building – or a new section of an existing one.
  • The property must belong to the taxpayer making the claim
  • The property must be used mainly or entirely for trade purposes in the tax year of assessment.

These provisions mainly apply to new buildings and new sections of existing buildings. If a previous private owner or tenant is involved, the property is unlikely to qualify for the allowance.

For new sections of existing buildings, the owner may only claim up to 5% of the value of the new section – not the entire building.

Expert advice for a successful commercial property deal

Consulting a professional accountant is the best way of ensuring a successful request to SARS – just like using a professional commercial property expert is essential when you’re in the market to buy.

To view our portfolio of new office buildings and units in the greater Cape Town area, contact the Commercial Space team today.