PROPERTY: Avoiding a VAT Of Trouble
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The question of when VAT is payable on the sale of a residential property has new relevance in the current economic cycle where many people are establishing home-based businesses to make a living.
Martin Schultheiss, CEO of the Harcourts Africa real estate group, says there is some confusion about VAT obligations when selling a residential property that is also used as the premises of the owner’s VAT-registered business.
“Whether or not VAT is payable on the property will depend on whether or not the owner has claimed VAT input credits on any additions or alterations made to the property in order to accommodate the business.
“Homeowners who wish to alter their homes to accommodate a VAT-registered business can avoid this issue by simply absorbing the costs themselves and not claiming any VAT credits through the business."
Sellers need to make very sure if they are liable for VAT and be scrupulous in paying the required amount – or risk the wrath of the Receiver in the form of stiff penalties. Sellers should seek out and heed expert advice before marketing their properties.
Schultheiss also cautions sellers who have claimed VAT inputs to take great care when determining the marketing price of the property. “Failure to include VAT charges may well result in diminished profits from the sale, while just adding VAT to the market value may result in overpricing, and thus little interest among buyers. The best advice is to speak to a reputable agent, who will be able to suggest a fair compromise.”
Business News Sector Tags: Property|