CHAPTER 1

1 Value-Added Tax VAT 409 Guide for Fixed Property and Construction for Vendors Issue 6 VAT 409 Guide for Fixed Property and Construction Preface i Preface This guide is a general guide concerning the application of the VAT Act in connection with fixed property and construction transactions in South Africa. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference.

2 Technical and legal terminology has also been avoided wherever possible. For details in respect of the general operation of VAT, see the VAT 404 Guide for Vendors which is available on the South African Revenue Service (SARS) website ( ). All references to the VAT Act or the Act are to the Value-Added Tax Act 89 of 1991, and references to sections are to sections of the VAT Act, unless the context otherwise indicates. Similarly, all references to TA Act are to the Tax Administration Act 28 of 2011.

3 The terms Republic , South Africa or the abbreviation RSA , are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of Republic in section 1(1) of the VAT Act. The terms Commissioner and Minister refer to the Commissioner for SARS and the Minister of Finance respectively, unless otherwise indicated. A number of specific terms used throughout this guide are defined in the VAT Act. These terms and others are listed in the Glossary in a simplified form to make the guide more user-friendly.

4 The information in this guide is based on the VAT and Tax Administration legislation (as amended) as at the time of publishing and includes the amendments contained in the Taxation Laws Amendment Act 34 of 2019, the Rates and Monetary Amounts and Amendment of Revenue Laws Act 32 of 2019 and the Tax Administration Amendment Act 33 of 2019, promulgated on 15 January 2020 in Government Gazette (GG) 42951, 42950 and 42952 respectively. The VAT rate was increased from 14% to 15% with effect from 1 April 2018.

5 Although rate specific rules apply to certain fixed property transactions, the examples in this guide are not affected by, and do not illustrate these rules. For information on how the VAT rate increase affects specific fixed property transactions, see Frequently Asked Questions (FAQs): Increase in the VAT rate from 1 April 2018 on the SARS website. The information in this guide is issued for guidance only. This guide is not an official publication as defined in section 1 of the TA Act and accordingly does not create a practice generally prevailing under section 5 of that Act.

6 It is also not a binding general ruling under section 89 of CHAPTER 7 of the TA Act or a ruling under section 41B of the VAT Act unless otherwise indicated. The previous edition of this guide has been withdrawn with effect from 11 December 2020. There are various other guides available on the SARS website which may be referred to for more information relating to the specific VAT topics. See the VAT 404 Guide for Vendors for a list of the various guides published. All guides, interpretation notes, binging general rulings, forms, returns and tables referred to in this Note are available on the SARS website.

7 For more information, you may visit the SARS website at ; contact your local SARS branch; VAT 409 Guide for Fixed Property and Construction Preface ii contact your own tax advisors contact the SARS National Call Centre if calling locally, contact the SARS National Call Centre on 0800 00 7277; if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093. Comments regarding this guide may be emailed to Prepared by Leveraged Legal Products SOUTH AFRICAN REVENUE SERVICE Date of 1st issue : September 1991 Date of 2nd issue : 9 December 2008 Date of 3rd issue : 31 March 2011 Date of 4th issue : 26 March 2013 Date of 5th issue : 27 September 2016 Date of 6th issue : 11 December 2020 VAT 409 Guide for Fixed Property and Construction Contents iii Contents Preface.

8 I CHAPTER 1 Introduction .. 1 Focus of the 1 Scope of 1 Approach of the guide .. 2 CHAPTER 2 Definitions and concepts .. 3 Enterprise .. 3 Continuously or regularly .. 3 Commercial accommodation .. 5 Non-enterprise activities (exempt and out of scope supplies) .. 5 Registration .. 6 Goods, fixed property and second-hand goods .. 7 Services .. 8 Supplies .. 9 Output tax .. 11 Input tax .. 11 Going concerns .. 15 Commercial accommodation and domestic goods and services.

9 16 Person .. 16 Agency .. 17 CHAPTER 3 Interaction between value-added tax and other indirect taxes .. 22 Introduction .. 22 Value-added tax vs transfer duty .. 22 Value-added tax and securities transfer tax .. 24 Contract prices .. 24 CHAPTER 4 Accounting for value-added 26 Introduction .. 26 Tax invoices .. 26 Agency .. 27 Time of supply .. 28 Value of supply .. 30 General rule .. 30 Connected persons .. 30 Commercial accommodation .. 31 CHAPTER 5 Adjustments .. 32 Introduction.

10 32 Irrecoverable debts .. 32 Debit and credit notes .. 33 Change in use or application .. 35 General .. 35 Change in use from taxable to private or exempt purposes .. 35 Decrease in extent of taxable use of capital goods or services .. 36 Change in use from non-taxable to taxable purposes .. 37 Increase in extent of taxable use or application of capital goods or services .. 37 Subsequent sale or disposal of goods or services partly applied for taxable supplies .. 38 Change in use upon acquisition of a going concern.