In terms of the provisions of section 64 of the Value-Added Tax Act, no 89 of 1991, any price charged by any vendor in respect of any taxable supply of goods or services shall, for the purposes of this Act, be deemed to include any tax payable in terms of section 7(1)(a) in respect of such supply, whether or not the vendor has included tax in such price or not.
According to section 67A(4) of the Act, in instances where an agreement of sale is concluded before the date on which a VAT increase takes effect, the applicable VAT rate for the transfer is the one in effect at the date of signature, provided the agreement expressly states the purchase price and both parties duly signed it. Consequently, if the sale was concluded prior to the increase, but registration occurs thereafter, VAT is payable at a rate of 15%.
The purchase price in a contract is often stated as “including VAT” or “VAT (if any) will be added to the purchase price”. If the deed of sale does not mention VAT, the price is for VAT purposes deemed to include the VAT charged under section 7(1)(a) of the Act.
Conveyancers are urged to draft their contracts of sale correctly and convey the correct information in the deed of transfer and supporting documents.
In the deed of transfer and power of attorney the purchase price must always be disclosed inclusive of VAT, if any. Nothing, however, prevents the drafter from disclosing the combined amount and thereafter reflecting the purchase price and VAT, separately.
Allen West
Property Law Consultant
HANNES GOUWS AND PARTNERS INC.
Attorneys, Notaries & Conveyancers
Tel: 012 321 1008
Cell 078 7655928
E-mail: allen@hannesgouws.co.za
Author of The Practitioners Guide to Conveyancing and Notarial Practice 3rd Edition
