WILL THE PURCHASER PAY TRANSFER DUTY OR PAY VAT

When the Seller Is a VAT Vendor

If the Seller of a property is registered for VAT, it is important to find out:

• Whether the property is part of their VAT-registered business (called a VAT enterprise), and
• Whether VAT will be charged on the sale.

It is strongly recommended that the Seller get written advice from their accountant or auditor at the time of signing the mandate (before marketing the property).

VAT vs Transfer Duty

• If VAT is payable, the Purchaser does not pay transfer duty.

• Both VAT and transfer duty are taxes, but in a property transaction, only one of these is charged, it will never be both.

When the Purchaser Is Also VAT Registered

If the Purchaser is also registered for VAT, they may be able to claim back the VAT paid on the transaction from SARS.

• If both the Seller and Purchaser are VAT registered, and the property is being sold as a going concern (for example, a rental property with tenants), then the sale may qualify as a zero-rated VAT transaction.
• This means VAT is charged at 0%, and no transfer duty is payable.
• However, if SARS does not approve the sale as zero-rated, VAT will be charged.
• That's why it is very important that the sale agreement clearly states who will pay the VAT if SARS refuses the zero-rating.

Final Note

The Seller, as the VAT vendor, is usually the one responsible for paying VAT, unless the contract clearly states that the Purchaser must pay it.