The VAT increase and the sale of residential property


Graeme Palmer | Director | Commercial Department | Garlicke & Bousfield Inc | mail me |

An increase in the Value Added Tax (VAT) rate to 15% will came into effect on 1 April 2018.

Generally, the sale of residential property is subject to transfer duty, however, if a seller is a VAT vendor, such as a property developer, VAT may be payable.

How will the VAT increase effect the sale of residential property, where a property is purchased before 1 April bu transfer only occurs after the date of the increase?

Usually a special time-of-supply rule applies to the sale of residential property. The supply is deemed to take place at the earlier of the date of registration of transfer, and the date any payment is received. A deposit, whether it is refundable or not, would not constitute a payment until it is released, forfeited or applied as partial payment of the purchase price.

The application of the above rule could present several problems for the sale of residential property where there has been an increase in VAT. For example, a sale agreement is concluded on 1 February 2018 where the purchase price is R11,400,000 inclusive of VAT at 14%, but the property is only transferred and payment effected on 5 April 2018. This would create a R100,000 shortfall in VAT.

Fortunately, there are special rules that apply to the sale of residential property when there is a change in the VAT rate. When residential property is sold in terms of a written agreement concluded before the date on which an increase in the rate becomes effective and the price is determined and stated in the agreement, VAT at the old lower rate will be payable, even though the normal time of supply will take place on or after the date on which an increase in the VAT rate becomes effective.

Residential property includes the sale of land on which residential property is to be erected, or where an agreement is entered into for the construction of new residential property.

The date on which the written agreement is concluded is important. SARS has previously indicated that the date a sale is concluded should be regarded as the date of the last signature by the parties to a bona fide agreement. This will apply even if the agreement is subject to suspensive conditions which are only fulfilled at a later date.

Therefore, provided that the sale agreement is signed before 1 April 2018, notwithstanding that transfer may take place after such date, the lower rate of 14% will apply.



  1. When my father bought our home he placed it under a company due to him suffering a stroke he was unable to continue with the payments of the house, we the children applied for bond and was approved for the balance of the monies owed to the bank. My father company is then placed under voluntary liquidation and the lawyers handle the transfer are charging us VAT. The question are they allowed to charge us VAT because my father company is not a proper developer this house is our residence?


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