VAT on Commercial Properties

Whilst not a Tax Expert, some Q & A on the impacts of VAT on Commercial Properties from Gary Walsh - Commercial Manager, Exclusive Links.

Is VAT on commercial properties hindering the commercial market growth?

Obviously, VAT is now another very real cost consideration when a business is looking at the renting or ownership of commercial premises or property. With many multinational companies, it is a negligible difference as the 5% application remains one of the lowest VAT rates in the world.

When and where VAT is applicable? 

VAT is applicable to all completed commercial revenues for either lease or sale transactions and including being applied to all agency commissions fees.  Rather than it actually affecting the cost of a commercial real estate transaction it is more of a flow of cash from one account to another. If a commercial property is bought to lease to a commercial tenant then the VAT paid by the owner when acquiring the property can be reclaimed as a landlord when charging the tenants rent. These same tenants who are paying the landlord VAT for renting these commercial premises will recover their rent from their commercial goods or services.  So ultimately it is the end consumer who is hurt the most and unable to reclaim on any VAT they pay for goods and services.    

What should the commercial asset buyers know about VAT input credit and output credit of VAT?

Companies need to be clear on their obligations and the guidelines, to incorporate VAT into their own accounting systems. It varies from business to business of their line of input and output, not only monetary but the flowchart of business from manufacturing to the finished goods being delivered to the customer. 

Any tips or advice for the commercial properties tenants and buyers on VAT? 

My hot tip used to be for businesses to try to secure and pay for any larger ticket items including any real estate transactions before 1st January 2018, but now that deadline has passed it's more - embrace it and include it in your daily business. Be aware of all your tax charges as you enter any negotiations and factor it into your bottom line and budgets. Be aware and clear on what you must pay for and what you can indeed pass on and charge for. Also remembering your mandatory government tax return date deadlines to avoid plenty charges for late returns. 
   
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