PROPERTY BUYERS RUSH TO BEAT INCREASED VAT

Property buyers are busy negotiating purchases in an effort to beat the new Value Added Tax (VAT) increase slated to commence next month. However, Aupracon Tax Specialists’ Managing Director, Jonathan Hore clarified that contracts for the sale or construction of dwellings will still be subjected to VAT at 12 percent provided the agreement is concluded before the commencement date of 1st April 2021. “In other words, a house which is sold before the effective date but which is transferred after that date will still be subject to VAT at 12 percent,” Hore said. He added that this development will excite banks, individuals purchasing houses and property developers. The tax specialist emphasised that an agreement for construction services in respect of a dwelling entered into before the effective date will not be subjected to VAT at 14 percent even when such services are rendered after the effective date. The VAT Act provides that where goods are sold and delivered before the date of change, VAT must be charged at 12 percent regardless of the fact that an invoice is raised post the effective date. However, Hore explained that goods sold after the said date will have to be subjected to VAT at 14 percent instead. “The Act is silent on the treatment of services provided before the effective date but in respect of which an invoice is raised after the VAT rate changes. “Technically, the services must ideally be subjected to VAT at 12 percent if they were provided before the effective date. This silence creates divergent views on the matter,” Hore said. Meanwhile, the switch to the 14 percent VAT rate does not affect zero-rated sales and those exempted from VAT such as residential rent.