How to claim VAT back before you're a VAT vendor!
One of our Practical VAT Handbook subscribers asked if he can get a VAT refund back on property expenses. The real kicker is, he hasn't registered for VAT yet!
Your immediate response may be to say no - it's not possible. One of our well respected VAT experts, Kallie Van Der Merwe, a writer for the Practical VAT Handbook, answered this question for our member.
Let's have a look at the question, and then see what Kallie had to say...
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Can we claim VAT on a property we bought before we registered as VAT vendors?
About two years ago, I bought a residential property in the name of a Pty (Ltd).
I plan to renovate it and run a frail care business from there. After waiting for two years for council approval, the renovations will start this week and it should take about five months.
We hope to exceed R1 million in annual turnover. So we'll have to register for VAT.
At that point (when the company registers for VAT), can we claim the VAT on the renovations as well as the VAT on the original purchase of the property? Is the VAT limited to the transfer duty?
If so, is there a specific procedure to follow? Or should we (and can we) register for VAT now to start claiming back?
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Let's see what Kallie has to say…
If the company registers for VAT when your turnover hits the VAT threshold of R1m per annum, you can claim the VAT from buying the property. You can also claim the renovations as an input tax deduction as a 'change in use' adjustment (Section 18(4), VAT Act).
A calculation that results in additional output tax you must pay; or
input tax you can claim.
You can claim VAT for:
Make sure you claim this within one month of your VAT registration!
Transfer duty paid.
Amount you paid for the property - if you registered the property in the company's name and you've finished paying for the property.
If you want to apply for voluntary VAT registration, you can do this when your taxable income is more than R50 000 in a 12 month period. This amount applies because the company's a welfare organisation. There's a whole chapter dedicated to Change in Use Adjustments, C02 in the Practical VAT Handbook. If you don't have a copy, click here.
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