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Considering a rental pool arrangement? Here's how Vat will affect you

by , 08 October 2013
If you own a property and provide commercial accommodation, but can't register for Vat, there's a way out. You can pool your unit with other owners and register as a rental pool for Vat purposes. But before you get into an arrangement, read on to discover how Vat works in a rental pool arrangement.

If you're the owner of a unit and are considering a rental pool arrangement, this is how it'll work for Vat purposes…

Here's how to correctly account for Vat if you're in a rental pool arrangement

For starters, the owners or shareholder must elect in writing that a rental pool must be formed and that it'll operate as a separate enterprise.

Keep in mind that the owners or shareholders can't operate a separate commercial accommodation enterprise for the same unit or property.

After this, the units will be pooled for Vat purposes in the rental pool.

The pool will then register as a separate vendor for Vat purposes.

To account for Vat, the pool must do the following:

  • Charge Vat on the rental income and pay over the output tax on its Vat return.
  • If one of the owners sells his unit, Vat will be charged by the pool, collected from the owner and paid over to SARS. The pool must also issue a VAT249 form. The reason for this is that the pool is seen to be carrying on an enterprise and not the individual owners, says the Practical Vat Loose Leaf Service.

Keep in mind that the pool can claim input tax on the purchase of the units where the units are already owned.

Your rental pool can also make input tax claims on other expenses relating to the units. But you must have tax invoices made out to the pool and not the individual unit-owner to substantiate the claims.

In addition, distribution of monies to the owners must be done nett of Vat. The owners need not further declare any Vat even if they're separately registered for Vat for carrying on another enterprise.

It's that simple to account for Vat in a rental pool arrangement. Keep these points in mind if you're the owner of a unit and are considering a rental pool arrangement.

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