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Budget 2018

22 February 2018

In the budget speech no major changes that specifically affect property transactions were made as Transfer duty and Capital Gains Tax will remain the same. However the increase in VAT from 14% to 15% which will come into effect on the 1st of April, will have an effect on estate agent’s commission, transfer and bond registration fees, and on the sale price of the property where the seller is VAT registered, making the purchase and sale of property slightly more expensive, as shown in the table below.

Amount/Value Total Bond costs R  Total Transfer Costs R
  2017 2018 2017 2018
R 500 000 12 208 12 310 12 208 12 310
R 1000 000 20 543 20 715 23 538 23 710
R 1 500 000 24 648 25 660 50 148 50 355
R 2 000 000 28 638 28 880 89 138 89 380
R 3000 000 37 024 37 336 199 843 200 155
R 4 000 000 45 004 45 386 317 823 318 205
R 5 000 000 53 293 53 745 436 278 436 730
R 6 000 000 57 283 57 770 550 268 550 755
R 7 000 000 61 608 62 130 664 608 665 130
R 8 000 000 65 598 66 155 778 598 779 155
R 9 000 000 69 943 70 535 892 943 893 535
R 10 000 000 73 933 74 560 1 006 933 1 007 560

 

Practical implications of the change in VAT for property transfers
Rate Specific Rules
The VAT Act contains rate specific rules that apply to certain transactions when the VAT rate is increased. If a rate specific rule applies, you must still account for output tax according to the normal time of supply rules, but the VAT rate to be used will be determined under the rate specific rule. Regarding the supply of residential fixed property, the following must be noted:

"Supply of residential fixed property
Even if the time of supply is triggered after 1 April 2018 due to payment or registration of the property in the purchaser’s name in a Deeds Registry taking place, the supply of residential fixed property could be subject to VAT at 14%. This rate specific rule only applies if –

  • the contract for the supply was concluded before 1 April 2018; and
  • both the payment of the purchase price and the registration of the property will occur on or after 1 April 2018; and
  • the VAT-inclusive purchase price was determined and stated as such in the agreement. For purposes of this rule, “residential property” includes a dwelling and certain real rights and shares in share block companies relating to a right of occupation of or interest in a dwelling.

The construction of a new dwelling by a construction enterprise is also included.”

This would imply that as long as the three conditions per the bullet points above are met, then the liability for VAT remains at 14% regardless of when registration or payment takes place.

Conveyancers should however refer any further questions not clarified by the above to SARS directly and read the VAT Pocket Guide on the VAT rate increase on 1 April 2018.

To read all documents relating to the budget go to National Treasury Department and for a summary of the Budget see the Budget Pocket Guide 2018-2019

The popular Tables of Costs for Conveyancing - ready reckoner will be updated and published soon to reflect the VAT increases.

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