South Africa


  • Service: Tax, Indirect Tax
  • Type: Business and industry issue
  • Date: 2012/05/24

Vat Inclusivity versus Vat Exclusivity 

The South African VAT Act generally deems the price charged by a vendor to include VAT. VAT inclusivity has often been disputed in South African courts.

In Strydom versus Duvenhage NO and another, the Court held on a VAT silent agreement, which determined that the purchaser was liable for transfer duty (if applicable), that the price included VAT and the seller had to issue a tax invoice. It could not be implied that a purchaser agreeing to pay transfer duty would not object to paying VAT instead.


Die Trustees van die Santinia Trust versus Beukes en n Ander dealt with the recovery of VAT where the supplier was not a registered VAT vendor when the contract was concluded. The supplier wanted to recover VAT on becoming registered for VAT. The Court ruled for the supplier.


In Van Aardt versus Galway, the seller leased his farm to the buyer with an option to purchase for R700 000. The buyer exercised the option indicating the price as R700 000 inclusive of VAT. The seller no longer wanted to sell and the buyer approached the Courts. The seller argued that the option was invalid and that it did not mention VAT, whereas the deed of sale recorded the price as inclusive of VAT. The seller argued that if the option terms were inconsistent with exercise terms, it could not have been exercised validly. The seller contended that the option implied VAT exclusivity and that any VAT liability would be for the buyer’s account.


The court held that the law did not imply VAT exclusivity since the VAT Act:


  • Allows VAT inclusive or exclusive transacting
  • Values a supply to be an amount of money where the consideration is an amount of money
  • Provides that where VAT is inclusive and not accounted for separately, the VAT is the tax fraction of the consideration
  • Presumes that a price is VAT inclusive.


The Court ruled that there could not have been tacit terms implied by the facts to the effect that the price would be exclusive of VAT since:


  • A hypothetical bystander would say that VAT was not payable and that the parties did not agree that, should VAT be payable, it would be for the purchaser’s account
  • The buyer would not have agreed to pay VAT in addition to the R700 000, but would probably have taken advice or negotiated further
  • It is not necessary to impute such an intention to the parties to lend business efficacy to the agreement.


The Court held that the option was valid and validly exercised. The terms of the sale were consistent with that of the option, even though the one determined VAT inclusivity whereas the other was silent on VAT.

As VAT inclusivity can severely impact the cost of a transaction, it is imperative to contract carefully to avoid the cost and time involved in legal battles.