BUDGET SPEECH 2018August 3, 2019
WHAT IT MEANS FOR PROPERTY TRANSACTIONS
We are relieved to see that the transfer duty tables have remained unchanged in this year’s 2018 Budget Speech however VAT will be increased from 14% to 15% as from 1 April 2018.
What does this mean for property transactions:
- Bond and Transfer fees – If you are purchasing a property and/or registering a bond, the transfer and bond costs (payable to the Conveyancers and other VAT registered vendors) will increase slightly for matters which will register on or after 1 April 2018 as a Conveyancer is only permitted to take their fees (although collected by way a proforma account ahead of time) on transfer. In the transition phase from now to 1 April, VAT at 15% may need to be paid if the transfer is scheduled to register after 1 April. By the same token, this will apply to all costs/disbursements payable which are subject to VAT. To get some perspective on the effect of the adjustment, on fees of R20 000, the VAT will increase by R200. Please note VAT on the fees will go up, not the actual attorney fees.
- Agent’s commission when you sell – if you are selling your property and are paying estate agent’s commission, the percentage of VAT which will affect you will depend on when the actual invoice is raised by the Agency, against their books. Commission is usually payable on transfer but often an Agency will raise their invoice prior to this date but payment will only be made then.
- Purchasing in a residential development, from a developer, for example – if you purchase a residential property (i.e signed the Sale Agreement) after 1 April 2018, which is subject to VAT (and not transfer duty), you will pay 15% VAT. If the Agreement is signed prior to this date the VAT shall remain unchanged as the date of signature of the agreement will determine the VAT rate. This is specifically dealt with in Section 67A of the VAT Act 2001.
- Commercial property subject to VAT – The Act is silent commercial transactions per se but Section 67 allows there to be a variation in the contract price if VAT is increased, unless otherwise stipulated in the Agreement, and the Sellers shall be entitled to recover this increase. Accordingly, the date of registration for commercial contracts is important.
If you have any queries please don’t hesitate to contact us.