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7 Ways in which the New VAT Increase will affect your Property Transaction as a Seller or Buyer

Posted by Laila Conlon on 30 Apr, 2018
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Sellers:

  1. Commission:  The amount of commission you will be liable for will increase, in the event that your estate agency is VAT registered (most are).  As an example, on the sale of a R1 500 000.00 property, and the average commission of other estate agencies, you will have to pay approximately R103 500.00 at the new VAT rate, instead of R102 600.00 at the old rate.  With our low commission at only 3.3% at the new VAT rate you would pay R56 925.00 versus the old VAT rate of R56 430.00.
  2. Certificates of Compliance:  As a Seller you are required to obtain COC’s for your property, which include the following (if applicable): Electrical, Woodborer, Gas, Electric Fence.  Most service providers which are registered to issue these certificates are also VAT registered.  This means that whatever the service charges are on these items, will go up due to the new VAT rate.
  3. Cancellation Costs:  If you are a Seller who has a bond, the bank which holds your bond, will instruct cancellation attorneys to cancel the bond at the Deeds Office at the same time as the new owner is registered.  These costs range from R3 500.00 to R6 500.00.  As a result, these costs will also increase by the appropriate amount as a result of the VAT increase.

 

Buyers:

 

  1. Transfer Costs:  As a buyer you are liable to pay for transfer costs to have the property transferred into your name.  Most attorney firms are VAT registered, and as a result the fees (not disbursements) will increase appropriately.
  2. Bond Costs:  As a buyer, if you do not pay for the property you buy in cash, the bank that has approved your bond will appoint a bond attorney to register the bond in favour of the bank (as security).  This is a separate cost to the transfer costs.  As a result, these will also increase with the VAT increase.
  3. New Developments:  If you purchase a property directly from a Developer, the price of the property if your deed of sale was signed before the 1st of April 2018, will be less than if it was signed after the 1st of April 2018.  This is because Developers are VAT registered, and therefore VAT is payable when you purchase the property, and not transfer duty as usual.
  4. Municipal Services:  The local municipality charges VAT on certain charges on your municipal statement.  As a property owner, you are liable for Rates (which is a Tax and therefore not Vatable), however the other charges such as fire levy, refuse removal, water, electricity and sewage are not taxes, and therefore are subject to VAT.  As a result, your normal municipal account will increase as well.

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