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.