South Africa’s VAT increase for property transactions

All property transactions that are subject to VAT (where the seller of fixed property is registered for VAT), agents commission as well as transfer fees and bond registration costs will be subject to the recent VAT increase from 14% to 15%.

Although the date of registration of transfer of immoveable property is the relevant date for payments, it is important to take cognisance of the following “Rate Specific Rules” in the VAT Act in order to determine which rate (14% or 15%) will apply at what time:

Supply of residential fixed property

Even if the time of supply is triggered after 1 April 2018 due to payment or registration of the property in the purchaser’s name in a Deeds Registry taking place, the supply of residential fixed property could be subject to VAT at 14%.

This rate specific rule only applies if –

1. The contract for the supply was concluded before 1 April 2018; and
2. both the payment of the purchase price and the registration of the property will occur on or after 1 April 2018; and
3. the VAT-inclusive purchase price was determined and stated as such in the agreement.

For purposes of this rule, “residential property” includes a dwelling and certain real rights and shares in share block companies relating to a right of occupation of or interest in a dwelling.

The construction of a new dwelling by a construction enterprise is also included.

Subject to the above 3 conditions being present the VAT rate for all contracts concluded prior to 1 April 2018 will remain at 14%. It goes without saying that all VAT agreements for the sale of immovably property entered into after 1 April will be at a rate of 15%.

Note that the above “Rate Specific Rules” are only applicable to the contract purchase price, inclusive of VAT, in a sale of immoveable property.

In the instance of agents commission, transfer fees and bond registration costs the date of payment thereof will determine the relevant VAT percentage.

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Written by Wessel de Kock

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