Invest in property before April and save on VAT

Private Property South Africa

Property buyers who invest before the revised tax figures kick in on 1 April 2018, will pay 14% VAT.

With an economy set to experience more growth than in recent years thanks to a change in political leaders who understand the importance of encouraging investment and stimulating economic development, the time is ripe for savvy property investors to make the most of potential capital growth. This is according to Chris Renecle, MD of Renprop.

He says that even though the 2018 Budget Speech delivered by Finance Minister Malusi Gigaba earlier this week outlined some tax changes that will make the general cost of living and off-plan property investment more expensive due to the increase in Vat from 14% to 15%, investors who purchase residential property that is subject to Vat before 1 April 2018 stand to save more and gain more.

“With regards to residential property sales, the increase in Vat will have an impact on estate agent’s commission, transfer and bond registration fees as well as the sale price of property where the seller is Vat registered, as is the case with most off-plan sectional title developments,” says Renecle.

Renecle points out that investors who purchase before implementation of the revised tax figures on 1 April 2018 will still be able to qualify for 14% Vat provided certain conditions are met.

He explains that even if the handover of the property occurs after 1 April 2018, the purchase of the property will be subject to Vat at 14% if the offer to purchase is concluded before 1 April 2018, the payment of the purchase price and the registration of the property an happens on or after 1 April 2018 and the Vat-inclusive purchase price was determined and stated as such in the offer to purchase agreement.

“Just 1% difference in Vat equates to R10 000 per R1million spent. Investors who are interested in purchasing units in new sectional title developments stand to gain if they invest in the next month or so,” Renecle concludes.

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