​VAT Connect Issue 9   (February 2019)

There has been a trend over a number of years for educational institutions such as universities that make exempt supplies under section 12(h) to acquire additional student accommodation facilities because of a lack of their own resources. Typically, the university will rent an entire building and then either configure it itself, or will have the building configured by a third party into a number of furnished apartment-style living units suitable for student accommodation.

This was the situation in the case of CSARS v Respublica (Pty) Ltd (12 September 2018). The case involved a dispute as to whether the written agreement between the owner of a building and a university constituted the supply of –

  • a building and related goods and services by the owner under a lease agreement which, in turn, would be used by the university to make a supply of accommodation to its students; or
  • “commercial accommodation” as defined in section 1(1) by the owner of the building to the university.

The Appellant submitted that it was making a taxable supply of commercial accommodation and was therefore entitled to charge VAT at the standard rate on only 60% of the value of supply under section 10(10). SARS was of the view that one must distinguish between the supply made by the owner of the building to the university and the supply of accommodation by the university to its students. In accordance with the view expressed by SARS, the supply of the building to the university constitutes a standard-rated supply and VAT must be charged on the full rental value according to the lease agreement. Further, that the university, in turn, supplied the student accommodation as part of its exempt supply of education as contemplated in section 12(h)(ii).

The court found that the supply by the owner of the building to the university did not meet the requirements of the definition of “commercial accommodation”. The full rental value for the building was therefore taxable in the hands of the owner of the building at the standard rate. Since the matter was decided at that point, the court found it unnecessary to consider whether the owner was making an exempt supply of dwellings under a lease agreement.

It is important to note that the Commissioner will not issue a ruling on whether or not a supply of accommodation or any right to occupy a building or part of a building constitutes “commercial accommodation”. Refer to Public Notice 748 (GG 40088 of 24 June 2016) for additional considerations under section 80(2) of the Tax Administration Act 28 of 2018 in respect of which an application for a ruling may be rejected. Guidance on commercial accommodation can be found in the VAT 409 – Guide for Fixed Property and Construction.


VAT Connect is an information guide and not an “official publication” as defined in section 1 of the TA Act and accordingly does not create a practice generally prevailing under section 5 of that Act. It is also not a binding general ruling (BGR) under section 89 of Chapter 7 of the TA Act nor a ruling under section 41B of the VAT Act. For general enquiries regarding VAT call the SARS Contact Centre on 0800 00 7277. Should there be any aspects relating to VAT on which a specific VAT ruling is required, you may apply for a ruling by completing form VAT301 and sending it together with all the necessary information to SARS by facsimile on +27 86 540 9390 or by e-mail to VATRulings@sars.gov.za. Refer also to the Quick Reference Guide on VAT Ruling Application Procedure for more details on how to apply for a ruling.

Last Updated: 22/02/2019 12:30 PM     print this page
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