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 ๐ณ๐๐ซ๐จ-๐ซ๐๐ญ๐๐ ๐๐จ๐ซ ๐๐๐ (๐%) under Section 11(1)(e) of the Value-Added Tax Act โ but only if the property is sold as part of an ๐ข๐ง๐๐จ๐ฆ๐-๐๐๐ซ๐ง๐ข๐ง๐ ๐๐ง๐ญ๐๐ซ๐ฉ๐ซ๐ข๐ฌ๐ ๐จ๐ซ ๐ ๐ ๐จ๐ข๐ง๐ ๐๐จ๐ง๐๐๐ซ๐ง, such as commercial leasing or an active hotel business, with all necessary assets transferred.
๐ดCORE REQUIREMENTS FOR ZERO-RATING
โข Both the buyer and seller must be registered as VAT vendors at the date of registration of transfer.
โข The property must form an income-earning enterprise (e.g., an office block with active tenants) rather than a vacant or non-functional structure.
โข The agreement must be in writing.
โข The contract must explicitly state that the property is sold as a going concern and that the VAT rate is 0% (zero-rated).
โข The earning activity must continue uninterrupted by the buyer.
โ ๏ธIMPORTANT 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.
๐๐ง๐๐๐ซ๐ฌ๐ญ๐๐ง๐๐ข๐ง๐ ๐ญ๐ก๐ ๐ญ๐๐ซ๐ฆ๐ข๐ง๐จ๐ฅ๐จ๐ ๐ฒ ๐๐๐ง ๐ก๐๐ฅ๐ฉ ๐๐ฎ๐ฒ๐๐ซ๐ฌ, ๐ฌ๐๐ฅ๐ฅ๐๐ซ๐ฌ ๐๐ง๐ ๐ฉ๐ซ๐จ๐ฉ๐๐ซ๐ญ๐ฒ ๐ฉ๐ซ๐จ๐๐๐ฌ๐ฌ๐ข๐จ๐ง๐๐ฅ๐ฌ ๐ง๐๐ฏ๐ข๐ ๐๐ญ๐ ๐ญ๐ซ๐๐ง๐ฌ๐๐๐ญ๐ข๐จ๐ง๐ฌ ๐ฐ๐ข๐ญ๐ก ๐ ๐ซ๐๐๐ญ๐๐ซ ๐๐จ๐ง๐๐ข๐๐๐ง๐๐.
