Exempt supply

The following supplies are exempt:

(a) undeveloped land,

(b) immovable goods (land or buildings) where the most recent development was more than five years before the supply,

(c) a completed property occupied for at least 24 months since its most recent development, where a taxable supply has occurred since that development between unconnected persons,

(d) a property completed more than five years before the supply, provided only “minor” work was carried out before the supply, i.e., work which does not adapt the property for materially altered use and the cost of which does not exceed 25% of the sale price.

A person making an exempt supply of property, may, together with the acquirer of the property, make a joint option for taxation. In such a case, the acquirer is accountable for the VAT.

Taxable supply

The supply of a developed property which is new and unused is taxable. Broadly, a property is new (i.e., developed in the five years prior to its disposal) and unoccupied.

Letting of property

Letting of property is exempt. A landlord may opt to charge VAT on a letting of commercial property. Such an option is exercised by including an appropriate provision in the letting agreement. The option ceases if the landlord:

(a) makes an exempt letting,

(b) agrees in writing with the tenant,

(c) notifies the tenant accordingly,

(d) becomes connected with your tenant,

(e) allows a connected person to occupy the premises,

(d) allows the property to be used as a residence.

A landlord may not opt to tax a letting to a connected person, unless the connected tenant uses the property for an activity in relation to which he is entitled to 90% deductibility.

Capital goods scheme

A property’s tax-life (adjustment period) is generally 20 years (10 years in the case of a refurbished property). Deductible VAT is adjusted for each year (interval) of the property’s VAT life by comparing the VAT deducted on acquisition with the proportion of taxable use during the initial interval. Depending on whether taxable use has increased or decreased, the VAT deduction for that interval will decrease or increase.

Where a person with full VAT recovery sells a property, but did not reclaim VAT on the acquisition of the property, he can get a full VAT credit for the unclaimed VAT, scaled back in accordance with the number of years elapsed since the property was acquired.

A property owner must keep a capital good record for each capital good.