Home business: What about VAT?

The question of when VAT is payable on the sale of a residential property has new relevance in the current economic cycle where many people are establishing home-based businesses to make a living.
Martin Schultheiss, CEO of the Harcourts Africa real estate group, says there is some confusion about VAT obligations when selling a residential property that is also used as the premises of the owner’s VAT-registered business.
“Whether or not VAT is payable on the property will depend on whether or not the owner has claimed VAT input credits on any additions or alterations made to the property in order to accommodate the business. For instance, if an outbuilding was converted to create office space and the cost of the alteration was claimed as a VAT input credit, VAT will have to be paid on the sale of the property, even if the property is not owned by the business or company.
“Homeowners who wish to alter their homes to accommodate a VAT-registered business can, however, avoid this issue by simply absorbing the costs themselves and not claiming any VAT credits through the business.
“But sellers need to make very sure if they are liable for VAT and be scrupulous in paying the required amount – or risk the wrath of the Receiver in the form of stiff penalties. If in any doubt whatsoever, sellers should take expert advice before marketing their properties.”
Schultheiss also cautions sellers who have claimed VAT inputs to take great care when determining the marketing price of the property. “Failure to include VAT charges may well result in diminished profits from the sale, while just adding VAT to the market value may result in overpricing, and thus little interest among buyers. The best advice is to speak to a reputable agent, who will be able to suggest a fair compromise.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 24 Nov 2017
      Demand for secure estate living in Hout Bay has risen sharply in recent years, precipitating a spike in development with estate homes now accounting for 20.24% of the property landscape with the launch of an exclusive new gated development on 26 November adding 20 more units to the existing 1250 estate homes.
    • 24 Nov 2017
      There are some things that money can’t buy – spectacular views from Mouille Point to the V&A Waterfront and a trendy and lively neighbourhood that encapsulates the very best of the Cape Town lifestyle.
    • 24 Nov 2017
      Tshwane’s four-bedroom Mayoral mansion, nestled among ambassadorial residences in the upmarket suburb of Muckleneuk, fetched R5.1 million after spirited bidding at High Street Auctions’ final sale of the year.
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us