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World Cup accommodation and tax

Are you offering accommodation to those attending the 2010 FIFA World Cup event? The income from accommodation has VAT implications, whether the landlord receiving the income is a company, close corporation, trust or individual.

Willie Smith

The VAT Act divides letting of accommodation into two main categories:

  • letting of residential accommodation (exempt supply for VAT purposes),
  • letting of commercial accommodation (standard-rated supply for VAT purposes).

The VAT Act describes residential accommodation (in S12(c)) as the supply of a dwelling under an agreement for the letting and hiring thereof. This does not constitute commercial accommodation and is therefore an “exempt supply” for VAT purposes.

The VAT Act describes commercial accommodation as lodging or board and lodging together with domestic goods and services which are regularly and systematically supplied and where the total annual receipts from the supply thereof exceed R60 000 in a period of 12 months. However, this excludes a dwelling supplied in terms of an agreement for the letting and hiring thereof.

As some landlords will be charging higher than normal rates for rental accommodation during the World Cup, this may result in the income exceeding R60 000 during a period of 12 months. In the absence of a rental agreement and in terms of S12(c) of the VAT Act, residential accommodation will be regarded as commercial accommodation for VAT purposes.

The duration of the World Cup may well result in rental periods exceeding 28 days as landlords may accommodate the same tenants for the entire time. The VAT Act (S10(10)) states that where domestic goods and services are supplied at an all-inclusive charge in any enterprise supplying commercial accommodation for an unbroken period exceeding 28 days, the consideration in money (for VAT purposes) is deemed to be 60 per cent of the all-inclusive charge. This means that VAT is only charged on 60 per cent of the all-inclusive charge (before VAT), saving the consumer money.

The above illustrates just some of the far-reaching consequences for VAT vendors. Tax payers should therefore ensure that they understand the implications of their circumstances in order to comply with the relevant Income Tax and VAT Acts.

For more information, contact Willie Smith at Tenk Loubser & Associates (Cape Town), tel. 021 915 6666 or e-mail