Can a vendor claim the transfer duty paid on property purchased prior to VAT registration
19 May 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: Is a vendor (a
partnership) able to claim the transfer duty paid on property purchased prior
to it registering as a vat vendor?
A husband and wife jointly purchased an apartment for
carrying on a business of short term holiday accommodation. The transfer of
property is dated November 2014. There is a partnership agreement between the
husband and wife. The partnership is now applying to register as vendor.
A: There are some
other issues that must be addressed before we deal with the request.
The first issue is that a partnership is, for value-added
tax purposes, a person separate from the partners. The registration must therefore be made in
the name of the partnership.
Based on the intended use of the property we accept that the
value of taxable supplies (of commercial accommodation) exceeded or will exceed
the additional R60 000 threshold – refer to proviso (ix) of the definition of
The last point is that the transfer duty can, since 10 January
2012, no longer be deducted. The
deduction of the transfer duty was replaced by the tax fraction of the
consideration, but see below.
Our guidance assumes that that the partnership will be
registered as a vendor and will be using the property of the partnership in the
course of making taxable supplies (or partly so).
The registration of a person as a vendor is a tax event
envisaged by section 18(4), if the goods or services acquired before the
effective date will subsequently be applied for use in the course of making
taxable supplies. The requirement (in
that section) is that "tax has been charged in respect of that supply.” Because transfer duty was paid it was not acquired
from a vendor and section 18(4)(c) will apply – second hand goods.
The deduction is made in terms of section 16(3)(f) and the
documents to substantiate the deduction is set out in Interpretation Note 49,
item E of Table C – Special deductions against output tax.
Because the goods (or services) are deemed to have been supplied
in the tax period (in terms of section 18(4)) of the change in use the
deduction must be made in that period.
The person has five years from this date to make the deduction if the
documents are not available in this period.
The same applies to second-hand goods.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.