Is your transfer zero-rated?

If a transaction is not VAT exempt, it means that VAT is indeed payable, and the next

question to ask is: “Is the transaction perhaps zero rated?”

Zero rated means that VAT is payable on the transaction, but at the rate of 0% and not at

the current rate of 15%.

What is the difference between Zero-rated and VAT exempt?

• If a transaction is VAT exempt, it falls outside of the “VAT net” altogether. Accordingly, transfer duty will then be payable. The position is therefore the same as if the seller was never registered for VAT.
• If a transaction is zero-rated it falls within the “VAT net” and all the provisions relating to VAT apply to the transaction, including the provision that the purchaser can still claim input tax credits in respect of the property concerned. Only the rate is 0% and not 15%.

REQUIREMENTS FOR APPLYING THE ZERO RATE

Where an enterprise is sold by a registered VAT vendor or to a registered VAT vendor as a going concern, the sale is subject to VAT at the zero-rate.

The zero-rate will only be applicable to a transaction if the following requirements have

been met:

1. The SELLER must be a VAT VENDOR;
2. The PURCHASER must be a VAT VENDOR;
3. The enterprise sold, must be a going concern;
4. The parties must specifically agree in writing that the enterprise is being sold as a going concern;
5. 5. The property must consist of an enterprise or a part of an enterprise, which is capable of separate operation;
6. The assets necessary for carrying on the income earning activity, must also be disposed of to the purchaser.

This article should not be construed as legal advice and has been produced for marketing purposes.

This article was written by M Van Heerden Attorneys, Notaries and Conveyancers.