Property Advice

VAT and your residential or commercial lease agreement

Private Property South Africa
The Property Guide |
VAT and your residential or commercial lease agreement

Does VAT apply to your residential or commercial property rental income?

VAT is exempt on residential property rental income

VAT is not chargeable by the supplier on any residential property rental income, regardless of whether the owner/landlord/agent/developer/speculator is a VAT vendor! This only applies to rental income (not sales) and does not include rentals for commercial accommodation (hotels or guest houses), industrial or agricultural property leases.

Renting out residential accommodation is what is known as an "exempt supply", which means that such rentals do not attract VAT. This applies whether or not you are a vendor for VAT purposes.

However, the commission charged by the agent managing the property is not part of the rent, even if such fee is deducted from any rent collected - it is a service rendered, and is therefore subject to VAT at the standard rate.

Owners using agents to take care of their properties must check your contract with your managing agent carefully, ensuring whether the percentage commission charged is inclusive of VAT or not.

In the case of commercial property (shops, factories, offices, etc), the supply thereof on a rental basis is not exempt, and accordingly VAT at 14% must be charged.

Likewise, commercial accommodation (hotels, holiday flats, bed-and-breakfasts, etc.) will be subject to VAT at the standard rate, as will be the cost of any ancillary services such as cleaning, maintenance, use of telephones, television (including satellite services), meals, and laundry.

The requirement to levy VAT includes lodging in a hospice, home for the aged, and facilities caring for the mentally or physically handicapped, unless such lodgings are provided by a non-profit organisation.

This article originally appeared in Property Power 11th Edition Magazine. To order your copy at the discounted price of R120 click here.

Looking for a new tenant?

Advertise your property to rent quickly and easily on our site

Find out more

Related Articles

Invest in student accommodation for solid returns
Sarah-Jane Meyer | 25 Sep 2019

Invest in student accommodation for solid returns

The ongoing student-housing shortage throughout South Africa provides rewarding opportunities for buy-to-let investors.

How building naming rights affect landlords and tenants
Jackie Gray-Parker | 14 Sep 2016

How building naming rights affect landlords and tenants

Most people are familiar with residential and commercial property lease agreements. However, when it comes to ‘leasing’ the rights to name a building, things can become quite complicated.

Three ways to collect rental arrears from tenants
Cath Jenkin | 28 Aug 2019

Three ways to collect rental arrears from tenants

Defaulting tenants can be a nightmare for landlords. Through this guide, we help landlords as you act on non-paying tenants to collect rental arrears.

sample image of property alerts

Get instant property alerts

Be the first to see property alerts for your area.
;