When one acquires an asset exclusively for the making of taxable supplies, any VAT incurred qualifies as “input tax”, eligible for deduction. However, when such asset is subsequently applied exclusively for a purpose other than the making of taxable supplies, section 18(1) of the VAT Act requires a so-called “change-in-use” adjustment. This entails the determination of the tax fraction of the market value of the asset in question, for payment to SARS as output tax. SARS currently assumes the temporary letting of a property held for sale, constitutes such a section 18(1) event and requires property developers to account for output tax, equal to the tax fraction of the market value.
Source: LinkedIn
