Let's look at these and offer answers that will hopefully provide you with the information you need.
Vat and property: What you need to know
Let's take as an example a company registered for Vat
and also a property rental company that rents out property to tenants for commercial and residential properties.
In this case, we'll answer these two questions:
1. Must a company charge Vat
on residential property that it rents out to tenants?
2. When a company that purchases residential property to rent out to tenants, claim back the Vat
as an input tax
Here are the answers...
1. For the first question, our answer is no The company can't charge Vat
on the rental of residential property – it's exempt under Vat
2. Secondly, the company can't claim the input tax
on purchases of residential property. Again, because it will be used for exempt from Vat
supplies, no input is allowed.
*********** Reader's Favourite ***************
Every South African tax
law explained by our experts
The Practical Tax Loose Leaf Service offers you:
• All the definitions and legal regulations, useful advice, exceptions to the rules that help you slip through the legislative jungle of taxes.
• Case studies and practical examples that show you what elements you should consider for your taxes to be perfect.
• Red flags you need to watch out for and the penalties you'll face if you don't respect them.
• Sample templates at your disposal, ready to be filled in, customised and printed.
Click here for more details
When it comes to the charged Vat
on holiday/residential accommodation, we have the example of a company that purchased holiday accommodation to rent out as holiday accommodation. It claimed the input tax
on the purchase of the property, and charged Vat
on the rentals to the people using the accommodation. It now wants to rent the property to a tenant on a one year lease. Must it charge Vat
on the rental to the tenant?
Our answer in this case is an affirmative one. Since the property qualifies as commercial accommodation, the company must charge Vat
on the rental.
However, keep in mind that you must reduce the value on which Vat
is to be calculated. So, say you'll rent out the property for R10 000 per month.
To calculate the Vat
, you'll have to do this:
R10 000 x 60% x 14% = R840 Vat
So your tenant will pay R10 840 total.
Note: If you're going to rent it out to tenants who use the house as their dwelling, you must pay back the input tax
which you claimed when you bought the property. De-register as a Vat
vendor and don't charge Vat
for the rental.