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South Africa: VAT rate increase on sales of fixed property

South Africa: VAT rate on sales of fixed property

The value added tax (VAT) rate is scheduled to increase to 15% (from 14%) beginning 1 April 2018. There are transition rules that apply with respect to the VAT rate increase. However, the transition rules do not determine the “time of supply” (i.e., the moment in time that triggers the taxing event), but consider the timing of specific events in order to determine the rate of VAT to be applied.


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What are the transition rules for the rate of VAT on sales of “fixed property”?

In general, with regards to sales of fixed (real) property, the “time of supply” is the earliest of: (1) the time any payment of the consideration is made; or (2) the date of registration in the deeds office. However, the output tax and input tax amounts are generally only payable (or claimable) after the time of supply has occurred, but only to the extent to which payment that discharges the obligation under the purchase price is made in part or in full. In other words, for fixed property sales, VAT is generally accounted for when the payments are made.

The basic transition rules for sales of fixed property provide:

  • An anti-avoidance provision provides that when a payment that discharges the purchase consideration (in part or in full) between 21 February 2018 (the date the rate increase was announced) and 1 April 2018, but the registration of the fixed property in the deeds registry takes place on or after 22 April 2018, the sale will be subject to the VAT rate of 15%, unless the vendor can prove that it customarily receives payment of the purchase consideration before date of registration. This provision is aimed at preventing a situation when a seller tries to have the 14% rate apply to the sale by triggering payment, even though registration will take place after 21 April. 
  • The VAT rate to be applied to sales of fixed or real property (other than fixed property to be used as a dwelling) is based on a determination when registration in the deeds office happens—if before 1 April, the 14% rate will apply and if registration occurs after 1 April, the 15% rate will apply. 
  • In the case of a sale of fixed property—including a unit in a unit trust scheme or a share in a share block company—that is to be used as a dwelling (i.e., residential purposes) or a contract for the construction of a dwelling, special transitional rules apply. When a written agreement for the sale of such fixed property or for the construction of a dwelling has been concluded before 1 April, the 14% rate applies, despite the fact that registration in the deeds registry may only occur after 1 April. 


Read a March 2018 report [PDF 225 KB] prepared by the KPMG member firm in South Africa

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