Navigating tax incentives for industrial property

Industrial property investment comes with several benefits. Beyond purchase, property buyers can maximise returns by leveraging various tax incentives associated with industrial property ownership.

These incentives can range from accelerated depreciation of property to tax allowance. As such, it can be an attractive option for property buyers or owners looking to realise substantial returns in the long term.

Accelerated depreciation

The government provides tax incentives to industrial property owners and renters, which can aid businesses in making informed decisions about whether to buy or lease industrial property.

What does it mean? Industrial property owners can use it for certain assets, allowing you to take away a larger part of the property's value from what you're taxed on in a shorter time. This helps lower the tax you owe and gives the business more money to work with.

Section 12I: tax allowance incentive 

The Special Economic Zones Act has the Section 12I allowance, which lets companies get a deduction on the money they make from certain types of factory work in special economic zones, which is meant to encourage businesses in these zones and boost manufacturing focused on exports. It supports Greenfield (new projects) and Brownfield (expansion/upgrade) ventures, focusing on capital investment and better energy compliance and training.

Buildings and machinery that are obtained with approval and put into use within four years meet the criteria. The investment allowance can be between 35% and 55% of these assets' value, with even higher rates for projects in Special Economic Zones. These projects must also fall under the SIC code's "manufacturing" category.

Other tax benefits, 13quin allowance

When buying property, consider tax deductions and allowances. Section 13quin provides an allowance for new and unused or modified buildings a taxpayer uses for business activities. Although it's referred to as commercial buildings iN SARS IN107, it simply means properties used for business, like offices, stores, and warehouses.

SARS IN107 describes interpretation of this rule and how the allowance works. To be eligible to claim the 13quin allowance, the following must met:

• It needs to be done on or after April 1, 2007
• The building must be new and have never been used before
• The taxpayer must be the one who owns the building
• It should be used mainly for business, not to house people
• A building must be used primarily for trade in the assessment year

According to 13quin, the overall deductions under this section must not exceed the property's cost, and a deduction can only be claimed if that cost qualifies under provision of the Income Tax Act. 

Tips for getting the most out of incentives

To use these benefits effectively, here's what to do:

• Get expert guidance: Work with people who know much about property taxes. They can help you find the best benefits for your investment and show you how to follow the rules.
• Keep accurate records: Always have the right documentation to claim incentives. Keep detailed records of how much it costs to buy the property, how much it costs to fix it up, and other costs.
• Stay informed: Tax laws change, try to stay up-to-date on changes that could affect your investment in the future.

Take an integrative approach to investing: You can ensure your investment fits your bigger financial goals by analysing to determine if the property is worth buying, from warehouses to manufacturing factories.

If you're keen on knowing more about industrial properties, whether you're looking to buy, rent or invest, Newpoint Property can help you navigate the process. Browse our property listings or get in touch with our property practitioners today for more information.