How will the VAT INCREASE FROM 14% TO 15% EFFECT PROPERTY TRANSFERS after 1 April 2018 relating to

The increase was announced in the Minister of Finance’s Budget Speech on 21 February 2018.

The standard rate of VAT will change from 14% to 15% on 1 April 2018 (the effective date).

LEGAL MATTERS

[endif]-- In respect of the question raised above two scenarios can apply:

SCENARIO 1:

In the event that the Offer to Purchase / sale agreement signed prior to the 1st of April 2018 read that the Agent’s commission is for example 5% (Five percent) plus VAT calculated on the Purchase Price and the transfer goes through for registration in the deeds office after the 1st of April 2018 then 15% (Fifteen Percent) VAT will be charged on the commission and not 14% (Fourteen percent).

The end result is that the seller (who sold prior to

1 April 2018) will receive a lower net amount on the

selling price because of the increase in VAT which is applicable on or after 1 April 2018.

SCENARIO 2:

Should the Offer to Purchase refer to a fixed commission amount inclusive of VAT i.e R100 000,00 (One Hundred Thousand Rand) inclusive of VAT, the opposite will apply.

The seller in this instance will receive the same amount/proceeds as he would have if 14% VAT was still applicable. The agent on the other hand will receive less because of the increase in VAT to 15%.

Questions for next month's issue can be emailed to chrisna@richeattorneys.co.za. For assistance in any property transfer matters kindly contact me on details below: