The Vat Act makes provision for time-share rental pools to register as vendors for Vat.
According to the Practical Vat Loose Leaf Service, pool arrangements are common in the context of the letting of commercial accommodation. In this case, the rental pool scheme is operated and managed for the benefit of some or all of the following interest groups:
This means the rental pool scheme is regarded as a separate business. And just like any other business, if its turnover in a 12 month period exceeds the R1 million threshold, it'll have to register as a vendor for Vat purposes.
The benefits of forming and using a rental pool
If you own a unit you're going to let for commercial accommodation, for example, holiday accommodation, you can register voluntarily for Vat, but your turnover in a 12-month period must first exceed R60 000.
But because of the nature of commercial accommodation sometimes it's not possible that you turnover R60 000 in a 12-month period required for voluntary registration.
Even though this is the case, you'll still have to pay Vat on furnishings, maintenance and other expenses, without any opportunity to claim anything back. You also have to pay either Vat or transfer duty on the purchase of the unit.
But if you can agree to form a rental pool with other property owners who provide commercial accommodation, you'll be able recoup costs and facilitate administration.
This pool will collectively administer bookings, income and expenses and maintenance. It would also register as a pool for Vat and be responsible for the collection and payment of Vat on the rental of the units.
Basically, a rental pool arrangement is a cost effective way if you own a property and provide commercial accommodation, but can't register for Vat because you have the backing of the other owners.