Purchase Price and VAT
In terms of the provisions of section 64 of the Value-Added Tax Act, no 89 of 1991, any price charged by any vendor in respect of any taxable supply of goods or services shall, for the purposes of this Act, be deemed to include any tax payable in terms of section 7(1)(a) in respect of such supply, whether or not the vendor has included tax in such price or not.
The purchase price in a contract is often stated as “including VAT” or “VAT (if any) will be added to the purchase price”. If the deed of sale does not mention VAT, the price is for VAT purposes deemed to include the VAT charged under section 7(1)(a) of the Act.
Conveyancers are urged to draft their contracts of sale correctly and convey the correct information in the deed of transfer and supporting documents.
In the deed of transfer and power of attorney the purchase price must always be disclosed inclusive of VAT, if any. Nothing, however, prevents the drafter from disclosing the combined amount and thereafter reflecting the purchase price and VAT, separately.
Tonkin Clacey (PTA)
Tel: 012 3461278