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Can you claim input tax on retirement home property?

by , 19 December 2013
One of the most common questions regarding retirement homes is whether or not vendors can claim input tax on retirement home property. If you're also wondering what the law says about this, read on to find out the answer...

If you're not sure of whether or not you're allowed to claim input tax on retirement home property, don't fret. The Practical Vat Loose Leaf Service has an explanation for you…

Here's what the law says about claiming input tax on retirement home property

You can claim input tax where you buy business property: If you buy a business property from which you'll establish your retirement home, the seller will charge you Vat.

Once the property is registered in your name and you've paid the seller the full selling price (even if you raised a bond with a bank), you can claim the Vat as input tax.

You can't claim input tax where you buy the business as a going concern: If, however, you decide to buy an operating retirement home from someone who is a Vat vendor, it will constitute the sale of a going concern at the zero rate of Vat and you won't be able to claim input tax.

  • This will be the case where you buy the whole business and the following requirements are met:
  • The whole business, or a separate part that can be run as a stand-alone business, must be sold.
  • All the assets necessary to run the business must be sold.
  • The business must be operational and income earning at the time it's sold – it can't be dormant, or be a new business that hasn't yet started operating.
  • The sale agreement must state that the business is sold as a going concern at the zero-rate.
  • The sale agreement must be in writing.

What if you buy a retirement home from someone who isn't a Vat vendor?

If you buy a retirement home from someone who isn't a Vat vendor, you'll pay transfer duty on the fixed property. You can, however, claim this back as input tax if your retirement home qualifies as a provider of commercial accommodation.

What if you convert part of your house into a retirement home?

You're entitled to a 'change of use' input tax claim on the fixed property and movable assets (for example, furniture) to be used for the retirement home.

Now that you know what the law says about claiming input tax on retirement home property, make sure you comply so you can avoid getting on the wrong side of SARS.

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