When is VAT applicable on the sale of property?

19/01/2023 - By Kelsey Nurse

Before we can answer the question of when VAT is applicable to a transaction, we need to first ask what the difference between VAT and Transfer Duty is.

Transfer Duty or Vat?

Transfer Duty is a tax levied on the value of any property acquired by any person by way of a sales transaction and is paid by the Purchaser to SARS according to the schedule determined by the Transfer Duty Act from time to time. Transfer Duty is not payable in the case of the seller being a VAT vendor.

VAT is a tax levied on the supply of goods or services by a VAT vendor and is paid by the Seller to SARS at 15% of the purchase price. The purchase price is VAT inclusive unless stated otherwise in the offer to purchase.

Who is considered a VAT vendor?

Any business/person who earns income from selling goods or services and earns in excess of R1 Million in a period of 12 months.
A business/person can voluntarily register for VAT if it/they earn in excess of R50 000 over a 12-month period.

When is VAT payable?
Paying VAT on a sale is determined by the status of the seller and the nature of the transaction. We ask the question: is the seller a vat vendor for the purposes of this transaction? In other words, is the property being sold owned by a VAT vendor. If the seller is a VAT vendor for the purposes of the transaction, the transaction becomes vatable, unless the transaction becomes zero rated as determined by SARS, in which case no VAT is payable.

Exception to Seller paying VAT
If the VAT vendor Seller has not claimed VAT input on the property or the property has been previously used for RESIDENTIAL purposes VAT will not apply and transfer duty will be payable.

Is the transaction zero rated?

Requirements for a transaction to be zero rated, are that on the date of sale:

• The seller must be a VAT vendor.
• The purchaser must be a VAT vendor.
• The property sold must be sold as a going concern, for example: Joe Soap (Pty) Ltd owns a spar and sells it to Jane Doe (Pty) Ltd for the same purpose to sell groceries, therefore all contracts, assets and the building are bought for that purpose.
• This must be expressly stated in the offer to purchase. (In writing)