When it comes to property, the VAT Amendment Act regulates the position. A distinction should first of all be made between commercial property (possibly also farms) and residential property (which is specifically excluded from VAT). With commercial transactions, or where the owner of immoveable property is a developer or otherwise registered for VAT, it is highly recommended that you know the regulations involved.
The most important matter to take note of is the fact that VAT can, over and above Transfer Duty, be levied on property transactions in Namibia. This differs substantially from the situation in South Africa where only one tax is payable – either VAT or Transfer Duty.
What happens if the parties neglect the VAT factor?
The seller will be liable for payment of VAT to the Receiver out of the proceeds of the sale, effectively resulting in the seller getting 15 % less for the property, or, the purchaser may end up paying Transfer duty and 15 % VAT on the purchase price, effectively resulting in the purchaser paying 15 % more for the property. The above case illustrates how careful we should be when introducing purchasers to commercial property and the structuring property transaction in general.
A transaction may be zero-rated in terms of the VAT ACT. There are requirements for this to apply:
The most important matter to take note of is the fact that VAT can, over and above Transfer Duty, be levied on property transactions in Namibia. This differs substantially from the situation in South Africa where only one tax is payable – either VAT or Transfer Duty.
What happens if the parties neglect the VAT factor?
The seller will be liable for payment of VAT to the Receiver out of the proceeds of the sale, effectively resulting in the seller getting 15 % less for the property, or, the purchaser may end up paying Transfer duty and 15 % VAT on the purchase price, effectively resulting in the purchaser paying 15 % more for the property. The above case illustrates how careful we should be when introducing purchasers to commercial property and the structuring property transaction in general.
A transaction may be zero-rated in terms of the VAT ACT. There are requirements for this to apply:
- The property/business is sold as a going concern - a most common example of this is when there is a tenant with a valid lease agreement at time of transfer in place.
- The business will be an income earning activity on date of registration of transfer - the lease will continue past the transfer date.
- Both parties, the transferee and the transferer should be registered VAT vendors in terms of the act on date of transaction.
- A notice in writing signed by the seller and the purchaser (usually a sales agreement) must be provided to the Receiver’s office within 21 days after the transaction takes place, which provides details of the transaction.
The VAT Act provides no extension for the 21-day notice period for whatever reason.
Whenever dealing with a transaction that might attract VAT, it is always best to consult a specialist in this area. Should you, as a purchaser, wish to change the private owned company to a cc for instance, it will be a good time to let the lawyer/agent know this from the start. The whole process can be handled together with the transfer process.
Whenever dealing with a transaction that might attract VAT, it is always best to consult a specialist in this area. Should you, as a purchaser, wish to change the private owned company to a cc for instance, it will be a good time to let the lawyer/agent know this from the start. The whole process can be handled together with the transfer process.