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South Africa: Revised useful life of self-developed computer software

South Africa: Useful life of self-developed software

The South African Revenue Service (SARS) released an updated version of guidance—Interpretation Note (IN) 47—about the useful life considered appropriate by SARS for determining wear and tear allowances on assets used in a taxpayer’s trade.

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IN 47 includes the recommended write-off period for self-developed computer software—which has been extended from one year to five years.

Accordingly, for in-house developed computer software brought into use on or after 24 March 2020, taxpayers can still claim a tax allowance on the cost of this asset, albeit over a longer period.

If a taxpayer wants to write off an asset over a shorter period than that as specified in IN 47, the taxpayer may file (lodge) an application with SARS. Such an application must, however, be lodged before the filing of the tax return in which the allowance will be claimed for the first time. In reviewing such an application, SARS will consider various factors that may result in the asset having a shorter useful life than the period prescribed, such as how long the taxpayer expects the asset to last and when the asset is likely to become obsolete.

Read an August 2020 report [PDF 636 KB] prepared by the KPMG member firm in South Africa

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