VAT Increase on 1 May 2025: What Estate Agents and Sellers of Fixed Property Need to Know

8 April 2025

AUTHOR: STEFAN LE ROUX

While transfer duty savings are certainly welcome news for property buyers, another important tax change is flying under the radar, and it is one that could quietly affect the bottom line of many fixed property transactions from 1 May 2025.

The increase in the VAT rate from 15% to 15.5%, and more importantly, how and when that rate applies to property sales. This is particularly relevant for estate agents, developers, conveyancers, and sellers dealing in VAT-registered property transactions, especially in the residential sector, where a specific exemption may apply if timelines are carefully managed.

The upcoming VAT increase is set to impact many sectors, but for estate agents and sellers involved in fixed property transactions, timing is everything. Understanding the “time of supply” rule and its exceptions for residential property is essential to ensure deals are correctly structured, and that clients are not surprised by unexpected tax costs.

The General Rule: Time of Supply Determines the VAT Rate

For fixed property transactions, VAT is determined based on the earlier of two events:

1. The date of registration of transfer in the Deeds Registry, or
2. The date any payment (other than a deposit held in trust) is made to the seller.

This means that even if an agreement or invoice was dated before 1 May 2025, if payment or registration only occurs after that date, the new 15.5% VAT rate applies.

Example: If a commercial building is sold and the tax invoice is issued on 10 January 2025, but the purchase price is paid and the property is registered only on 2 May 2025, VAT at 15.5% applies despite the earlier tax invoice. That invoice must be corrected to reflect the proper rate.

The Exception: Residential Property Sales Concluded Before 1 May 2025

There is, however, a measure of relief for those involved in residential transactions. A rate-specific exemption may apply where the following conditions are met:

1. A binding written agreement was concluded before 1 May 2025;
2. Both payment and registration take place on or after 1 May 2025that date; and
3. The purchase price is stated as VAT-inclusive in the agreement (this would be the case in almost all residential property sale agreements)

If all these conditions are met, the 15% VAT rate still applies, not 15.5%, even though registration and payment happen after the increase.

What Should Estate Agents and Sellers Do Now?

1. Inform clients early – especially sellers and buyers of residential property – about this timing issue.
2. Ensure contracts are concluded before 1 May 2025 if you want the current 15% VAT rate to apply.
3. State clearly in agreements that the price is VAT-inclusive to qualify for the residential property exception.
4. Coordinate closely with attorneys and financial institutions to time payments and transfers strategically.

Though a half-percentage point may seem modest in measure, in the world of property, it can translate into a considerable cost. Let there be no misunderstanding nor confusion. By preparing in advance, and by heeding the provisions of the law, we may serve our clients with dignity and excellence, ensuring that no one is unduly burdened.

Proactive communication and proper structuring can prevent costly misunderstandings. Estate agents and sellers who understand these nuances will not only protect their deals they will also build greater trust with their clients.

In the event of uncertainty as to the proper application of these rules to a particular transaction, it is both wise and prudent to seek the counsel of those duly qualified. A registered tax practitioner, well-versed in property law and conveyancing, can offer clarity where doubt may linger.

At SL Law, we are honoured to serve with distinction in the fields of commercial, tax, and property law, with particular expertise in international and cross-border transactions. Our team is dedicated to providing thoughtful, meticulous guidance, ensuring that each matter is handled with the precision and care it so rightly deserves.

At SL Law, we are honoured to serve with distinction in the fields of commercial, tax, and property law, with particular expertise in international and cross-border transactions. Our team is dedicated to providing thoughtful, meticulous guidance, ensuring that each matter is handled with the precision and care it so rightly deserves.

For those seeking trusted advisors in these complex times, we welcome the opportunity to assist with discretion, diligence, and the highest standards of professional service.

Let your transactions proceed not only in accordance with the law, but with confidence and peace of mind.