“Prop”aganda – Reintroducing Section 18B of the Value-Added Tax Act for Much needed Cash flow relief

Our brave President’s new economic plan has found favour with many South Africans and its businesses affected by COVID-19. I personally commend his efforts to bring about fundamental change to the economy and create greater equality for all, especially in these trying times. I will most certainly be doing my best to contribute to our national effort to protect, restore and build this great nation.

As a Property Developer we harness the uncertainty and unknown by reflecting on the situation collectively; Utilizing existing knowledge and bring about change trough constructive dialog. The uncertainty in the market conditions during and post Covid-19, dominates these discussions and certainly has the potential to repeat the 2008 residential market crash. Will the recent consecutive reduction in the interest rate be enough to stimulate the market? or, will the consequences of the adverse market and economic conditions push prospective buyers into the rental market? Let’s not wait in vain for a Cassandra figure, let us bring about effective policy change.

Section 18B of the Value-Added Tax Act, 1991 (the “VAT Act”) ,was introduced early in 2012, this legislation brought about significant cash flow relief for Residential Developers by allowing them to temporarily let their residential units (held for sale) for a period of up to 36 months before the VAT under the change in use provisions became payable. However, It was only short lived relief as the cessation of relief under section 18B of the same act, was enforced in January of 2018 triggering an immediate VAT liability on the open market value of all unsold residential properties temporarily let.

Reintroducing Section 18B will bring about significant Cash flow relief for Property Developers who in turn will through further investment stimulate the Residential property market, a pillar for the New South African economy. Let us bring about effective policy change for a better future......

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