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Property developers made a big splash about selling cheap properties... here's what they didn't tell you

by , 20 June 2013
For most first time homebuyers, the moment of signing the offer to purchase is filled with nervous excitement. For the Jansen's, it was when they were first confronted with an additional R140 000 on their R1 million dream home.

When Breyton and Marietjie finally received the forms to make an official offer on their dream home, it became a nightmare. The offer that the property developers had advertised on billboards all over town, wasn't at all what was reflected in black and white.

For the Jansen's, this meant they couldn't afford to make a formal offer, and their property search had to start all over again. Find out how you can avoid falling into this trap.

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How this one Vat rule left the Jansens without their dream home

In an attempt to encourage potential buyers interested in newly developed (or soon to be developed) homes, property developers made big promises. SARS sees this as the developers promising what they can't deliver. It has adjusted the legislation about advertising new developments.

If you're a property buyer, what they didn't tell you was although transfer duty may not be payable, you won't benefit from a 'bargain' of any sorts. If your property developers are Vat vendors, and the property forms part of their enterprise, you'll have to pay the Vat (14% of the purchase price) on the property. But that's not where the issue ends.  

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If you're like the Jansens, you'll need to find out if the Vat will be charged before you decide to make an offer on the property. If you're planning to live in the house – you can NEVER register for Vat. This applies even if you register the property in a CC, a Trust or a Company.

You can only register for Vat if you use the property for either rental income or commercial accommodation. If you're not a Vat vendor and buy a house you'll be charged at 14% if the developer's registered for Vat.

If you're a property developer, you can't advertise that transfer duty isn't payable. SARS now legislates that you must state upfront that Vat will be included in the price. Otherwise you're misleading the buyer.

P.S. Do you have Vat questions to ask? Check out our Accounting and Tax Club site where 1200 people have already been asking for free. Have you?

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