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I recently had a call about whether student accomodation is a VATable supply. This is an important consideration if you are planning to buy a property for that purpose.

I could not answer off the top of my head, so had to do some research and surprise, surprise, there is no simple answer.

The South African Institute of Chartered Accountants discuss the matter in some detail, but I have to confess, that after studying the article several times, I still don’t know the answer to the question.

In essence, the question is whether the agreement is that of renting commercial or residential property. If commercial, the VAT must be charged (and, importantly, can be claimed on the purchase of the property) and if residential, then VAT may not be charged (or claimed).

And that’s where the problem starts. There was a case Republica (Pty) Ltd v C:SARS case number 864/2014,where the taxpayer rented accommodation to a university, which in turn rented it to students. The courts found that this was a commercial rental transaction and therefore that VAT applied. However, the court was not asked to consider whether the rental agreement between the university and the students was a commercial or a residential agreement.

SAICA appear to take the view that the renting to students is a non-VATable supply.

So, the best I can offer is this –

If you rent the property to a university/college etc for onward rental to students, this is likely commercial rental and you will charge and claim VAT.

If you rent to students directly, this is likely residential rental and you may not charge or claim VAT.

Derek Springett, CEO of HArbour & AssociatesNeed help with a VAT related issue?

Contact us today or set up a free meeting with our CEO, Derek Springett, to discuss your options. We have been offering expert business advice and services since 1971. You can also visit our online store to see our list of business services.


  1. Hi I will like to understand if I have to pay VAT or not. I have loan of 54 million. I used it to build students accommodation with a capacity of 376 students. I got a two years agreement with the university to accommodate student. My company is vat registered, so during construction I have manage to claim vat of about 7 million. I am now finished and renting out to the student as per the agreement with the university. Do I need to pay VAT from the student rental?

    1. Hi Mulalo,
      We are now having regular meetings on this matter but for the sake of readers, it seems that s10(10) of the VAT Act can apply. It just needs to be read carefully.

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