Value added TAX buyers who buy fixed property from a non-vendor will sooner realize that they will receive bigger tax deductions. The reason for this because of the changes to the Value added TAX Act 89 of 1991.
Before the changes of the act, South Africans were limited to the detectable tax because of the transfer duties of the property which is being purchased. This deduction was only available to property buyers if they’re sole purpose is to make profits from the purchased property. For example, if you buy a block of offices to make profits out off. It is no longer applicable to limit the detectable tax to the transfer duties.
It is important to know that if you want to qualify for VAT deductions you must be a South Africa citizen, you must have paid the full price of the property and the property must be registered by the Deed Office in South Africa. It still works the same as in the past; a piece of property must be purchased by a vendor in order to make profits from it. For example; if a vender paid R5m for the property he will be liable to pay a transfer fee of R317 000, and deductible tax can only be limited to that amount. With the recent changes we will see that a vender will now be liable to deduct tax from R614 035. Showing that there is a big difference due to the new implemented rules. If a vender buys a property for personal use he or she won’t be able to deduct tax from the purchase. One can always change the property to business purposes, and then only will you be able to deduct the taxes.
To Conclude. We can see that there are thus big financial differences in buying property for personal use or for business use. If you can make money from property then you can enjoy the big tax deductions, otherwise it will be treated as normal.