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Building Allowance

Building allowance - Section 17(1)(f)

Where you use a building as part of your trade (i.e. using it directly or indirectly to earn income), capital allowances are available.

An initial allowance of 20% of the cost of erection can be claimed in the year the building is first brought into use. Thereafter, an annual allowance of 4% is deductible for the 20 years following the year the building was brought into use. Registered manufacturers qualify for an annual allowance of 8% (for 10 years) as opposed to the 4% applicable to normal taxpayers.

Additions to existing buildings (not alterations, improvements or repairs) qualify for the same 20% and 4% deductions as above. The Income Tax Act does not contain a definition for "buildings". The Oxford dictionary defines a building as "a structure such as a house ... that has a roof and walls". This can be used as a basis when deciding if the capital allowance on buildings can be claimed.

Fencing, roads, interlocks, boundary walls and shade nets do not qualify for this allowance. These items may be argued to be part of the building where it is done as part of the initial construction of a new building.

NB: When a building is sold, the new owner may only claim a building allowance on the original erection costs of the building. This is different than the price for which it was acquired. Furthermore a building can only be claimed once for tax purposes. If you are buying a building that is older than 21 years no further allowances can be claimed. Where a building is acquired it is crucial to obtain the tax history of the building. This will ensure that you (the new owner) claim the correct amounts for tax purposes.

Where buildings are sold, the allowances previously claimed should be recouped. Refer to the example at the end of this article.

No building allowance will be available if:
  • a leasehold improvement allowance has already been claimed; or
  • the building is used to provide housing to your employees; or
  • the building is owned by a company and used to provide housing to directors, officials or employees of the company


Company X originally erected a building for N$500,000 in year 1. The cost of the land was N$100,000. Company X used the building for 4 years and then sold it to Company Y for N$1,000,000 (N$800,000 for the building and N$200,000 for the land). No manufacturing status is available for Company Y.

Calculate the building allowance claimable by Company Y.


No allowance will be available for the land portion. No allowance will be available for the difference in the acquisition cost (N$800,000) and the original erection cost (N$500,000).

A 4% building allowance on the original cost price of the erection of the building (N$500,000) will be available. This will be available from year 5 until year 21 if the building is used in the taxpayer's trade.

N$500,000 x 4% = N$20,000 per year