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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15601
Experience:  15years with H & R Block. Divisional leader, Instructor
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I am buying a commercial property that consists of 90% residential

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I am buying a commercial property that consists of 90% residential flats(Renting out) and 10% retail shops.The seller is registered for vat and my Trust(The Buyer) not.
Do I Pay transfer duty or VAT on the Purchase price?

Robin D :

Hello
A sale by a Vendor to a Vendor of a building comprising primarily residential units but including commercial units. VAT must be added to the purchase price but the purchaser will be entitled to claim an input tax credit limited to the fraction which the square meterage of the commercial units bears to the total square meterage. (It may be possible to persuade
Revenue to accept the apportionment on a rental basis.)

Customer:

So do I have to pay vat on the full purchase price? Remember I am not registered for VAT, so i can not claim any vat.

Robin D :

The full price unless you would wwnat to ask SARs to apportion by the % of business units.
If you continue the business you will need to register. The seller would add the VAT to the purchase price and the amount you pay would be increased. The seller would remit the VAT

Customer:

Can I register my Trust for VAT and ask for a zero rate transaction?

Robin D :

You will need to register because of the on going business of the letting but you would not be allowed to ask for zero rate unfortunately. You could ask for the prorate of the units in relation to the rental of the units.

Robin D :

I am not even willing to guarantee that SARs would accept but it is not unrealistic to request.

Customer:

what is the prorate in relation with the rental? I do not understand

Robin D :

The commercial units would allow for a credit so you could ask that SARs allows for the VAT only on the residential units at the sale.

Robin D :

As the Trust is not registered it could not get the credit so not paying on the commercial portions at sale would be you assist.

Robin D :

Talk it over with your legal and the seller.

Customer:

Thank you very much. It helps. Than unfortunately I will not be able to buy this specific property. The VAT will be more than R550k

Robin D :

You are most welcome

Robin D :

Your positive rating is always thanks enough.

Robin D. and 4 other Tax Specialists are ready to help you