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SARS Vat Guide for Fixed Property & Construction

ConstructionIn the interest of our Members and readers we have attached a copy of "The SARS Vat Guide for Fixed Property & Construction March 2013". Albeit that it is a somewhat lengthy document, it is of extreme importance to the construction industry and Members are well advised to familiarise themselves with it:

Policy Background

The supply of fixed property and construction services are considered to be “difficult-to-tax” goods and services and VATCOM1 gave serious consideration to these industries before subjecting supplies of fixed property to VAT in South Africa when VAT was introduced in 1991. This was in light of the fact that construction services received favourable treatment under general sales tax (GST). As a result of the socio-political importance of housing, (particularly low-cost housing) and the fact that the construction industry is a provider of employment to a large workforce, a special subcommittee of members of VATCOM and the industry was formed to consider the matter in depth. The subcommittee divided its task into two parts: “Housing and the Construction Industry”, and the effect of VAT on “Land” was considered as a separate subject.

The policy recommendations of VATCOM were substantially adopted in the VAT legislation when it was implemented on 30 September 1991, and although various amendments have been made over the years, the policies remain essentially unchanged in the current law.

The recommended policy framework was briefly as follows:

Construction industry

Representations were made to VATCOM for either a VAT rate of approximately half of the standard rate, an exemption from VAT or a zero-rating to apply to the construction industry. The main motivation for concessions was the effect VAT would have on housing, particularly low-cost housing. A number of requests were also made that all housing receive some form of concession in order to ensure continued demand, which would amount to an indirect subsidy of the industry through the tax system. VATCOM, however, could in principle see no reason why construction services should not be subject to VAT at the standard rate.


After having considered various inputs from highly regarded writers on VAT and the construction industry, VATCOM concluded that the acquisition of land is consumption expenditure which should be included in the VAT base and that conceptually there does not appear to be any reason why land should be treated differently from any other durable goods.

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Greg Beykirch | Finance Director

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