A new interpretation of the VAT (Value Added Tax) act by the South African Revenue Service could have a dramatic consequence on the rented property sector, a tax expert has claimed.
Frikkie de Jager, a tax consultant at PricewaterhouseCoopers, told Business Day that under the previous interpretation of the VAT Act, the letting and subletting of a 'dwelling' - defined as a place of accommodation mainly used by an individual - was exempt from VAT. However, de Jager says that this is no longer the case and new rules stipulate that income from lettings is subject to VAT at 14%.
However, the tax consultant observed that sublettings will remain exempt as long as the dwelling is used by private tenants for residential purposes.
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