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Thread: Greetings | Domestic Property Amnesty | VAT

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    Junior Member think108's Avatar
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    Question Greetings | Domestic Property Amnesty | VAT

    Greetings Forum Members and Dave.

    I hooked in after hearing about you on Pete Carruthers' Global Warriors recently. It's a great thing you are doing.

    We are fortunate to own a home in Johannesburg, which we put into a company. This was the right thing to do to avoid transfer duties in 1998.

    But, as you will know it has become very costly from a tax point-of-view for a company to dispose of a property. For example, I reckon the sale of a property worth R5.5 million would attract some R840,000 of capital gains tax plus R540,000 dividends tax. And I forgot to mention VAT.

    So SARS has offered an amnesty where a company sells a property to individuals who can satisfy certain conditions. The amnesty was first announced in 2002 and was recently reintroduced for transactions taking place before December 31, 2012.

    In our case, we meet the requirements for relief on Transfer Duty, CGT, STC and Dividends Tax. We own the cc and the cc will sell to us. So it is a no-brainer that we should wish to take advantage of the relief described in a Guide to the Disposal of Residence from a Company or Trust published by SARS.

    But here's the catch: our company is VAT registered. Will the transaction attract VAT? Because if it does we are looking at R800,000, and it's a deal-breaker.

    Our auditors say “yes”, our Conveyancer says “maybe”. The SARS call centre says “put it in writing and ask for a directive.”

    What you say?

    I reckon our only hope is that there is a test for a transaction to be VATable: the entity is VAT registered and it is in the ordinary course of business of the VAT registered entity. I'd argue this is not the case here.

    There must be many with this question on their minds right now, given the approaching deadline.

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    Site Caretaker Dave A's Avatar
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    Welcome to TFSA

    May I move your post to the tax forum? It's more likely to be read by the folk who could give a well informed comment.
    The trouble with opportunity is it normally comes dressed up as work.

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    Junior Member think108's Avatar
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    Hi Dave.

    Yes, please do.

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    When the company originally took transfer, did it claim an input credit of the transfer duty? That's probably the big question.

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    Junior Member think108's Avatar
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    Quote Originally Posted by CLIVE-TRIANGLE View Post
    When the company originally took transfer, did it claim an input credit of the transfer duty? That's probably the big question.
    Yes, I recall we claimed back the transfer duty, which we could only have done if we were VAT registered. It made it possible for us to do the deal. Now I am regretting it because we claimed back R110 k 14 years ago with a present value of say R280k and have paid at least R200 k in VAT, with no end in sight until we get our bond payments down.

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    That's the test that is applied, and so it will attract VAT.
    As far as I know, the VAT is limited to that originally claimed (but I might be wrong), so it might not be a total train smash.

    Your auditors should be able to get a ruling.

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    think108 (20-Nov-12)

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    Junior Member think108's Avatar
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    Domestic Property Amnesty / VAT

    Quote Originally Posted by CLIVE-TRIANGLE View Post
    That's the test that is applied, and so it will attract VAT.
    As far as I know, the VAT is limited to that originally claimed (but I might be wrong), so it might not be a total train smash.

    Your auditors should be able to get a ruling.
    We got advice from our auditors, and our trust administrators - who in turn consulted some prof at UNISA. Unanimous opinion was R740 k VAT would be payable, being the full amount of 14% of the market value of the property. So that canned the deal.

    To add insult to injury, in the process of applying for the substitution of bond holders, the Standard Bank closed our access facility on the existing loan. So from having access to well over to R2 million as a line of credit - we were dropped to zero. Without notice. Bastards. We've been with them my entire working life. So we will gradually close all our accounts and migrate to FNB, I think. I'm sure Standard'll miss us .

    Love to know any other stories about the pitfalls of the amnesty in general and the Standard Bank in particular.

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    Junior Member think108's Avatar
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    And thanks, Clive-Triangle for taking the trouble to reply to the post. Much appreciated.

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    You're welcome. I truly think your advisers are wrong and that any vat or duty would be limited to the credit originally granted... I feel your pain. It is a pity they did not get a ruling from SARS.

    Would you like to hear some horror FNB stories ?

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    Junior Member think108's Avatar
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    [QUOTE=CLIVE-TRIANGLE;80116]You're welcome. I truly think your advisers are wrong and that any vat or duty would be limited to the credit originally granted... I feel your pain. It is a pity they did not get a ruling from SARS.

    1.How much would SARS charge me for a ruling? Its not avery complicated thing.

    Recall - We own a home in Johannesburg, which we put into a company, which we registered for VAT and claimed back our transfer duties of R110 000. 14 years ago. SARS has offered an amnesty and we meet the requirements for relief on Transfer Duty, CGT, STC and Dividends Tax. We own the cc and the cc will sell to us. But will the transaction attract VAT? And how much? Our auditors say “yes”, R770 000, being 14% on a municipal valuation of R5500000. our Conveyancer says “maybe”. The SARS call centre says “put it in writing and ask for a directive.” And our trust administrators say definitely R770 000.

    2. If we got a ruling, would it bind SARS? - assuming it was a favourable one costing us only R110 000 of VAT (to save some R2 200 000 in the event of a sale)

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