that the time of supply of the property is the date on
which the property is transferred into the name of the
purchaser or the date on which any payment is made
by the purchaser, whichever date is earlier.
Judgment
The court stated that with regard to VAT, the issue
for determination was whether the applicants, being
the sheriff and the judgment creditor, had a duty to
establish the VAT status on the property and disclose
this information to L. It referred to the principles
mentioned above and stated further that there is “the
notion that operates in respect of VAT transactions
that the purchase price of the property is deemed to
be VAT inclusive, except if the conditions of sale provide otherwise”. This means that the seller as VAT
vendor is liable to SARS for the output tax payable at
the point of transfer.
On the facts, it emerged that the seller, ET was a
VAT vendor and thus under normal circumstances, it
would have had to account for VAT and pay the VAT
out of the purchase price to SARS. However, it had to
be taken into account that the property was sold at a
sale in execution, which occurred at an auction, without the judgment creditor’s or ET’s involvement. As
ET was unable to pay VAT to SARS, the obligation
to pay VAT fell on the judgment creditor, as holder
of rights over the property, to pay the VAT over to
SARS. It was therefore correct for the judgment
creditor to have demanded the VAT amount from L
before transfer of the property could take place.
The court held that under the circumstances L
should have established whether ET was a VAT vendor prior to the auction and rejected L’s argument.
In this regard, the only obligation that lay with the
judgment creditor was to enquire whether any real
rights attached to the property that was being sold
in execution. According to the court, these factors
were inconsequential to the main issue regarding the
payment of VAT by L. In conclusion, the court held
that L was obliged to pay VAT on the transaction to
SARS before transfer of the property into its name
could take place and since L didn’t meet this obligation, the applicants were entitled to cancel the sale of
the property in execution.
Comment
The case should serve as a caution to persons who
purchase property at an auction to always determine
whether VAT or transfer duty will be payable on a
transaction, depending on the parties involved. Usually, a purchaser should ensure that they are able to
pay VAT if necessary, so that there is no risk that the
transaction can be set aside for this reason at a later
stage.
RESOURCES
Cliffe Dekker Hofmeyr
Services Seta and FASSET
Accredited
Property & Finance
Training Specialists and
Consultants to the Private and
Public Sectors
CPMD offers other courses in:
Finance & Accounting
Borrower Education
Management
Soft Skills
@ CPMD_SA
cpmd.norwood
www.reimag.co.za
103 William Road, Norwood, Jhb ● [email protected] ● +27 11 728 7225 (Jhb)
Residential Handbook 2016/17
15