26/08/2026
Property Market Terminology | A Quick Guide To VAT Zero-Rating
When two VAT-registered companies buy and sell a property in South Africa, the transaction can be 𝐳𝐞𝐫𝐨-𝐫𝐚𝐭𝐞𝐝 𝐟𝐨𝐫 𝐕𝐀𝐓 (𝟎%) under Section 11(1)(e) of the Value-Added Tax Act – but only if the property is sold as part of an 𝐢𝐧𝐜𝐨𝐦𝐞-𝐞𝐚𝐫𝐧𝐢𝐧𝐠 𝐞𝐧𝐭𝐞𝐫𝐩𝐫𝐢𝐬𝐞 𝐨𝐫 𝐚 𝐠𝐨𝐢𝐧𝐠 𝐜𝐨𝐧𝐜𝐞𝐫𝐧, such as commercial leasing or an active hotel business, with all necessary assets transferred.
🔴CORE REQUIREMENTS FOR ZERO-RATING
• Both the buyer and seller must be registered as VAT vendors at the date of registration of transfer.
• The property must form an income-earning enterprise (e.g., an office block with active tenants) rather than a vacant or non-functional structure.
• The agreement must be in writing.
• The contract must explicitly state that the property is sold as a going concern and that the VAT rate is 0% (zero-rated).
• The earning activity must continue uninterrupted by the buyer.
⚠️IMPORTANT RULES AND RISKS
No Overlap: Property transactions are subject to either standard/zero-rated VAT or transfer duty, but never both at the same time.
Failed Qualification: If SARS later rules that the transaction did not qualify as a going concern (e.g., the building was vacant and had no active leases), the seller is liable for standard-rate VAT (15%) plus potential interest and penalties.
Contractual Protection: Sale agreements should always include a fallback clause stating that if SARS disallows the zero-rating, the buyer must pay the standard 15% VAT amount to the seller.
𝐔𝐧𝐝𝐞𝐫𝐬𝐭𝐚𝐧𝐝𝐢𝐧𝐠 𝐭𝐡𝐞 𝐭𝐞𝐫𝐦𝐢𝐧𝐨𝐥𝐨𝐠𝐲 𝐜𝐚𝐧 𝐡𝐞𝐥𝐩 𝐛𝐮𝐲𝐞𝐫𝐬, 𝐬𝐞𝐥𝐥𝐞𝐫𝐬 𝐚𝐧𝐝 𝐩𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐩𝐫𝐨𝐟𝐞𝐬𝐬𝐢𝐨𝐧𝐚𝐥𝐬 𝐧𝐚𝐯𝐢𝐠𝐚𝐭𝐞 𝐭𝐫𝐚𝐧𝐬𝐚𝐜𝐭𝐢𝐨𝐧𝐬 𝐰𝐢𝐭𝐡 𝐠𝐫𝐞𝐚𝐭𝐞𝐫 𝐜𝐨𝐧𝐟𝐢𝐝𝐞𝐧𝐜𝐞.
