Category: Update Blast | 15.5% Dwelling Residential Property Transactions VAT Rate 1 May 2025
VAT RATE CHANGE AND ITS IMPACT ON RESIDENTIAL PROPERTY TRANSACTIONS
As of 1 May 2025, South Africa will see an increase in the VAT rate from 15% to 15.5%. This change will affect various transactions, including the purchase of residential property. However, a specific rule applies to residential property transactions where a contract was signed before the VAT rate increase.
WHEN DOES THE 15% VAT RATE STILL APPLY?
If you signed a contract to purchase residential property (such as a dwelling) before 1 May 2025, but the payment and registration of the property will only take place on or after this date, the VAT rate that applied before the increase will still apply. This means you will pay 15% VAT instead of 15.5%, but only if the following conditions are met:
- Contract Conclusion: You must have signed a written agreement to purchase the property before 1 May 2025. A concluded contract is legally binding, even if it includes suspensive or resolutive conditions.
- Payment and Registration: Both the payment of the purchase price and the registration of the property in your name must occur on or after 1 May 2025.
- VAT-Inclusive Price: The VAT-inclusive purchase price must have been determined and stated in the agreement.
If any of these requirements are not met, the new 15.5% VAT rate will apply to your transaction.
WHAT QUALIFIES AS RESIDENTIAL PROPERTY?
This rule applies to a variety of residential property transactions, including:
- Existing dwellings, along with the land on which they are built or any associated real rights.
- Plot-and-plan deals, where you purchase the land along with a package for constructing a dwelling.
- New dwellings, where the property is being constructed by a vendor involved in the construction business.
Additionally, if the payment and registration of the property occur before 1 May 2025, the VAT rate of 15% will apply, regardless of when the contract was signed.
KEY TAKEAWAY
If you signed your contract before 1 May 2025 and meet the other requirements, you will still benefit from the 15% VAT rate on your residential property transaction, even if payment and registration occur after the VAT rate increase. However, if the conditions are not met, the new 15.5% VAT rate will apply.
DISCLAIMER
Nothing in this article and/or post should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure accuracy, Tax A Sured (Pty) Ltd does not accept any responsibility for consequences of decisions taken based on this article and/or post. It remains your own responsibility to consult the relevant primary resources when taking a decision.
