Here’s how the VAT increase affects your property transaction
The Minister of Finance this week announced an increase in VAT from 14% to 15%, effective from 1 April, 2018. The VAT Act makes specific provision for residential properties in the case where the VAT rate is amended.
MC van der Berg of MC van der Berg Incorporated explains when consumers will pay the new VAT rate of 15%, and when they will still be charged at 14%.
“The Act determines that in the case of the following:
- The deed of sale is signed before 1 April, 2018 and
- Registration and payment will take place after 1 April, 2018, and
- The deed of sale involves a VAT inclusive purchase price
then VAT will still be payable at the effective rate as on date of contract (in other words 14%).
Should a deed of sale (signed before 1 April, 2018) have a suspensive condition and this condition is only satisfied after 1 April, 2018, then the position will be the same and VAT will be levied at 14% as it will be regarded that the suspensive condition was fulfilled retrospectively.
The VAT rate is determined on the date on which the transaction is deemed to take place. The deemed date of the transaction is the earlier of the following two dates:
- Date on which the invoice is delivered
- Date of payment
Therefore, if the invoice for commission is delivered before 1 April, 2018, then VAT at 14% will be levied. If the invoice is delivered on or after 1 April, 2018, then VAT at 15% will be levied.