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Three instances when hiring out your property for holiday accommodation will be Vat exempt

by , 14 February 2014
Owning property is a lot more complicated than you think. One of the reasons is because of the different Vat rules that apply. Read on to discover three instances when letting your building for holiday accommodation will be Vat exempt.

Before we get to three cases where Vat exemption applies, let's first talk about the different supplies you must know about when it comes to property and Vat law.

Vat law makes reference to these different supplies:

  • Accommodation. This is the supply of a dwelling (a place people rent from you and stay in);
  • Commercial accommodation is the supply of lodging or board and lodging, including domestic goods and services typically by a hotel or guest house; and
  • The commercial or business letting and renting scenario.

Now let's get to Vat exemptions.

Hiring out your building for holiday accommodation is Vat exempt under these three circumstances

Three case where Vat exemption applies:

#1: If you supply accommodation as a dwelling (place of residence or abode for people) by way of an agreement for letting and hiring;

This means that no Vat is chargeable on the rental. You also can't claim any input tax deductions on it, says the Practical Vat Loose Leaf Service.

#2: If you supply lodging or board and lodging supplied to your employee; or

#3: If you're a local authority and supply lodging or board and lodging in a hostel to your employees.

Important: Holiday accommodation, whether in a hotel, flats, guesthouse or caravan park, isn't exempt from Vat. You must charge Vat at the 14% standard rate.

If you get the Vat treatment on property wrong, you'll get severe penalties. SARS is very intolerant of non-compliant taxpayers.

Luckily knowing the three instances when letting your building for holiday accommodation will be Vat exempt will bring you a step closer to being compliant.

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