Affect Of Looming VAT Increase and Your Property
We’re headed for a VAT increase; but you have already signed the OTP! Now what?
The 2018 Budget Speech, delivered by now former finance minister Malusi Gigaba in February 2018, had many South African citizens listening attentively to know what they are letting their pockets in for. With the 1% increase in Value Added Tax (VAT) effective as of Sunday, 1 April 2018, many are buckling up to face this head-on, but what does this mean for fixed property sales that are currently in progress or still being negotiated (i.e. before 1 April 2018)?
As a potential home buyer, you have already signed the Offer To Purchase (OTP) agreement, but the transfer is only taking place after 1 April 2018, yes, the day the new VAT rate is in full effect. So, what now?
14% or 15%?
This has been the first VAT rate increase in almost 25 years (the first since 1993) from 14% to 15%. Property vendors and buyers have also raised numerous questions regarding the VAT implications of transactions that are yet to be concluded.
Leonard Willemse, Senior Tax Consultant at Mazars (one of South Africa’s leading auditing, accounting, tax and advisory firms) discusses the issue and hopefully answering the burning questions in a recent Property24 article highlighting whether 14% or 15% would be applicable to you when 1 April 2018 approaches, and to conclude, if what our former finance minister refers to as ‘alright’, is indeed so.
No time to read?
Well, the short of it is, that if your property transfer has not yet passed before 1 April 2018, you will be liable for 15%. Read the in-depth article on the VAT increase Property24.
It is now even more important that you list with a low commission agency such as ourselves so you pocket the most from your property sale.