Cape Town - A question raised about the 1% value-added tax (VAT) increase to 15% as from April 1 2018, as announced in Budget 2018, is how it will affect fixed property sales currently in progress or under negotiation. Leonard Willemse, senior tax consultant at Mazars, explains this question stems specifically from the application of the time of supply rules regarding the sale of fixed property.
If a VAT vendor - for example a property developer - has signed a sales agreement on January 1 2018, but both the payment of the sale price and the transfer of the fixed property is done on or after April 1 2018, it raises the question of which VAT rate applies to the transaction: 14% or 15%? The VAT Act states that fixed property is supplied under a sale at the earlier of the dates on which registration of the transfer of the fixed property at the Deeds Office takes place or when any payment in respect of the sale price for such "supply" is made by the purchaser.
He gives as an example a situation where a VAT-registered property developer enters into a sales agreement with a purchaser on January 1 2018 for the sale of a unit with a price of R10m (inclusive of VAT). Both parties sign the agreement on January 1 2018, construction starts before April 1 2018, is completed after that date and the registration of the transfer of the property in the Deeds Office is after April 1 2018. Payment is made on the transfer date.
In terms of the fixed property time of supply rules, the time of the supply takes place after April 1 2018, effectively resulting in the transaction being subject to VAT at 15%. The seller ends up receiving less from the sale or, conversely, the purchaser ends up paying more.
sourse: News24
This vat increase is said to be necessary and thus, as much as it will negatively affect low income earners, it is good for the county's economy.
ReplyDeleteYes it is good for the benefit of the Country's economy, but what about those low income earners, that's why this is called abusive tax because its not fair to low income earners because now price will increase parallel to that increment in Vat even though it was promised that basic needs products will not be affected but comes 1st of April you will see prices going up.
DeleteThe issue with the increase in VAT is a very controversial one. As much as it is what is needed to redeem the country and it's economy from junk status, it should also consider how it will affect those that receive little to no income at all. I, for one, feel as though there could have been another way used to generate money than the increase on VAT because we will suffer.
ReplyDelete