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The Vat rules for the purchase of fixed property mean you can claim back more cash

by , 15 November 2013
Are you considering buying a fixed property, through your business? Then here's some fabulous news: There are specific Vat rules that apply when you buy fixed property. Apply them correctly and you'll put more cash back into your business.

The experts at the Practical Vat Loose Leaf share all the details!

Here's how to claim back more input tax on the purchase of a fixed property
You can now claim the full 14/114 tax fraction on the purchase price, and not just the Transfer Duty, as the Transfer Duty Restriction no longer applies.

Before January 2012, if you bought fixed property from a non-Vat vendor (the property is seen as second-hand goods) that you were going to use in your taxable activities, you were allowed to claim the Transfer Duty you had paid back as input tax.
But this changed on 13 January 2012 to allow vendors to claim the full 14/114 on the purchase of such properties.
If you bought an office block for R5 million and paid a Transfer Duty of R500 000, here's how the change in Vat law will affect you:

Purchased prior to 13 January 2012 Purchased after 13 January 2012
Paid R500 000 transfer duty: Input tax claim limited to transfer duty paid Paid R500 000 transfer duty: Entitled to full notional input tax claim of R5m x 14/114
Claim R500 000 in block 14 of Vat return Claim R614 035 in block 14 of Vat return
 
You'll need to know what classifies as a fixed property before you can claim input tax on one:
• Land (including improvements on the land);
• A sectional title unit;
• A share in a share-block company;
• A timeshare interest in any timeshare scheme; and
• Any right in such land, unit share or timeshare.

Make sure you take advantage of this Vat perk if you're buying a property. 

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