VAT on Residential letting

There's no VAT charge on letting of residential property, but be careful if you own a residential hotel, frail care facility, retirement home or similar long term accomodation

So, you own a house or a residential unit and rent it out. That is not a vatasble supply.

If you own commercial property for rental, then that is vatable at the current rate of 15%.

It gets interesting if someone stays in your guest house, B&B, hotel, retirement home, frail care home or the like.

If the person stays for 28 days or less, then the full amount of charges attracts VAT.

If, however, the stay is for longer than 28 days only 60% of the amount charged regularly (i.e. as part of the package) is deemed to be vatable at 15% from day one. Thus the effective VAT rate drops to 9%. The declaration (VAT201) discloses only the 60% as vatable sales and the 40% is not diclosed. This will probably result in the issue by SARS of an IT14SD when the Income Tax Return is submitted and it will then be necessary to submit a reconciliation between turnover per VAT returns and turnover per the Income Statement.

The full amount of Input VAT is claimable as the 40% non-vatable sales is not treated as exempt sales.

If you want it from the horses mouth, copy and paste this to your internet explorer http://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-VAT-G04%20-%20VAT%20411%20Guide%20for%20Entertainment%20Accommodation%20and%20Catering%20-%20External%20Guide.pdf then go to page 53.


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