VAT on Residential letting
There’s no VAT charge on letting of residential property, but be careful if you own a residential hotel, frail care facility, retirement home or similar long term accommodation
So, you own a house or a residential unit and rent it out. That is not a vatable supply.
If you own commercial property for rental, then that is vatable at the current rate of 15%.
It gets interesting if someone stays in your guest house, B&B, hotel, retirement home, frail care home or the like.
If the person stays for 28 days or less, then the full amount of charges attracts VAT.
If, however, the stay is for longer than 28 days only 60% of the amount charged regularly (i.e. as part of the package) is deemed to be vatable at 15% from day one. Thus the effective VAT rate drops to 9%. The declaration (VAT201) discloses only the 60% as vatable sales and the 40% is not disclosed. This will probably result in the issue by SARS of an IT14SD when the Income Tax Return is submitted and it will then be necessary to submit a reconciliation between turnover per VAT returns and turnover per the Income Statement.
The full amount of Input VAT is claimable as the 40% non-vatable sales is not treated as exempt sales.
If you want it from the horses mouth, go to s10(10) of the VAT Act.
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Good day, I own a Alzheimer assisted living facility in our residential home. How will the VAT apply as I do not charge VAT on the invoice to the family?
Hi Amanda,
I doubt that your turnover for that exceeds R1m a year. Then you would not have to register for VAT.
However, if I have guessed wrong, then you are running a guest house and the information in my article applies.
Good day
If I personally own a house, which is used by my company as guest house (not owned by my company), and the my company charges R25420 for 31 days, what would the VAT rate be in terms of s10(10) of the VAT Act?
Don
Hi Don,
It’s 9% of R25 420. That’s the VAT but the net income is taxed in your hands, not the company’s. s7(7) is dealt with in this article https://www.harbourassociates.co.za/seo-blog/can-my-company-earn-the-rental-from-property-that-i-own/
Good day,
If the University is leasing a building on behalf of the students; will VAT be on the full 15%?
Hi Babalwa,
The question of VAT on student accomodation has not yet been finally settled. It is debated in detail by SAICA and the Tax Faculty. They both come to the same conclusion so here’s the latter article.
https://taxfaculty.ac.za/news/read/value-added-tax-on-the-supply-of-student-accommodation.
Essentially, the view is that if the property is rented to the university, then it is subject to VAT (at 15%). If it is rented to the students, it is most likely exempt from VAT.
My daughter is in rented accomodation in a college .
What is the vat payable to the college on Electricity.
Hi Chris,
15%