Vat and Transfer Duty, Points to Ponder from Len Pears of Quagga Property Brokers

Vat and Transfer Duty, Points to Ponder from Len Pears of Quagga Property Brokers

For those of you out there looking to invest in commercial property for the first time, there are a few financial implications you need to be au fait with before doing so. Yes, the returns are potentially attractive, offering a yield as well as capital growth; however it is very important while assessing the opportunity, to look at the various costs associated with this sector.

A few questions to consider are:

• Are you buying the property in your private capacity or in a company/cc?
• Are you a Vat vendor?
• Is the property you are purchasing in a company/cc, and is it a Vat vendor?

A property transaction will involve either Vat or Transfer Duty. The answer to which this lies with the status of the Seller. When the seller is a VAT vendor, then VAT will be added to the purchase price. When the Seller is not a Vat Vendor then Transfer Duty becomes applicable

Where the seller is not a VAT vendor and the Purchaser pays Transfer Duty, the amount is calculated as a percentage of the purchase price. If the purchaser is a company, trust or close corporation, then transfer duty is payable at a flat rate of 8% of the purchase price. If, however, the purchaser in this instance is a Vat Vendor the Transfer Duty paid can be claimed back as Vat

If both the seller and purchaser are VAT vendors and the property being sold is sold as part of a going concern (e.g. a letting enterprise), then the transaction may be zero-rated. The sale of a property with a tenant lease is a primary example. Note, however, that the lease needs to continue to be operational.

If you have any queries please don’t hesitate to contact us on 021 712 8825 or visit www.quaggapropertybrokers.co.za 

ENDS