An exploratory study on value-added tax consequences of a residential property lottery in South Africa

Danielle van Wyk and Andrea van der Merwe

South African Journal of Accounting Research, 2023, vol. 37, issue 1, 19-34

Abstract: To dispose of a residential property in terms of a lottery transaction is a change in the business manner how residential properties are usually being disposed of, namely either through an estate agent or a private sale. A number of these transactions have occurred in South Africa in the last six years. This article considers a scenario where the main parties who participate in the lottery transaction are: the seller of the property, the winner of the property (multiple persons can purchase a lottery ticket, but only one person wins the property) and the attorney who oversees the lottery and is a non-resident of South Africa for tax purposes. Since a lottery transaction is seen as a different way of how residential properties are normally being sold, the main objective of this article is to explore the possible value-added tax (VAT) consequences for the different parties, depending on whether the parties are registered for VAT in South Africa or not. To meet this objective, a doctrinal research approach was followed by analysing South African and international literature to determine the recommended VAT treatment of these property lottery transactions, as no clear guidance can be found on this. It is suggested that the South African Revenue Service should consider issuing clear guidelines in respect of the VAT consequences of property lottery transactions.

Date: 2023
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DOI: 10.1080/10291954.2022.2069388

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