A construction enterprise owner recently completed a residential dwelling and had it put up for sale via various estate agents. The business owner noticed that one of the advertisements states that there are no transfer costs and that these are included in the purchase price and believes to be an error.
"When does VAT apply and when does Transfer Duty apply to the property I am selling?"
Tarryn Gravenor, Herold Gie Attorneys attorney and conveyancer responds:
1. Does VAT or Transfer Duty apply to your property sale/purchase?
Before advertising your property for sale, during negotiations with prospective purchasers, and when preparing your agreement of sale, it is important to consider and be mindful of whether or not VAT or Transfer Duty will apply to the transaction. Getting it wrong can cause unwanted and costly surprises for the Seller and Purchaser alike.
Either VAT or Transfer Duty will apply, but not both.
The key is to determine whether the Seller is a registered VAT vendor, and whether the sale of the property in question forms part of the VAT enterprise.
(If in doubt as to your obligation to register as a VAT vendor, take advice from your Tax Advisor.)
If yes, then VAT will be payable on the purchase price and it is important that the sale agreement clearly reflects that VAT is included or excluded in the purchase price, at what rate (i.e. either at 15% which is the norm, or at a zero rate in the case of the sale of a going concern). If it is not clearly stated or if no mention is made of VAT then VAT will be deemed to be included in the purchase price.
If no, then Transfer Duty is payable on the purchase price to the extent that the purchase price exceeds R1,1 million.
* Disclaimer: The articles on these web pages are provided for general information purposes only. Whilst care has been taken to ensure accuracy, the content provided is not intended to stand alone as legal advice. Always consult a suitably qualified attorney on any specific legal problem or matter.
Readers may submit questions to Property24’s Guest Expert panel. We may not be able to answer all questions received, but all will be considered.
Want all the latest property news and curated hot property listings sent directly to your inbox? Register for Property24’s Hot Properties, Lifestyle and Weekly Property Trends newsletters or follow us on Twitter, Instagram or Facebook.
Print
