9 Steps to establish a rental pool for VAT purposes
If you own a property and provide commercial accommodation, but cannot register for VAT, there's a way out for you.
You can pool your unit with other owners and register as a rental pool for VAT purposes.
Having said that, here are 9 steps you can follow in establishing a rental pool...
The owners or shareholders must elect in writing that a rental pool can be established and that it'll function as a separate enterprise.
The owners or shareholders can't operate a separate commercial accommodation enterprise for the same unit or enterprise.
The units are then pooled for VAT purposes in the rental pool.
The pool registers as a separate vendor for VAT purposes.
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The pool charges VAT on the rental income and pays over the output tax on its VAT return.
If a unit is sold by one of the owners, VAT will have to be charged by the pool and collected by the owner before being paid over to SARS.
The pool also gives out a TD5 form, the reason for this being that the pool is seen to be carrying on an enterprise, and no the individual owners themselves.
The pool can claim input tax on the purchase of the units.
Where the units are already owned, an input tax adjustment, based on the lowest cost or open market value, can be claimed.
The pool is also entitled to input tax claims on other expenses which relate to the units. But it must have tax invoices made out to the pool and NOT the individual unit owner. This is in order to prove the truth of the claims.
*Would you like to find out what the last vital step is? Then subscribe to the Practical Tax Loose Leaf Service today.
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