In South Africa, “sold as a going concern” is one of the most misunderstood concepts in commercial property transactions. If the transaction meets SARS’s strict criteria, VAT may be charged at 0% instead of 15%, but only where the legal and practical requirements are properly satisfied.

In reality, many deals become unexpectedly expensive because the parties assumed they qualified when they did not. Transactions that were meant to be VAT efficient can end up attracting full VAT, damaging the deal’s financial viability and straining the relationship between buyer and seller. Often, the cause is small structuring or documentation details with very big consequences.

Here are the most common and most costly oversights:

1. The property is not actually producing income

SARS requires that what is sold is an income-generating enterprise (or a part of an enterprise capable of separate operation) at the time of sale, and that the purchaser can continue that enterprise from the effective date. If rent is not being collected, if the lease has lapsed, or if occupation was never formalised, SARS may regard the property as a non-trading asset rather than an active enterprise, and zero rating is often denied.

2. The lease agreement is defective or incomplete

Defective lease documentation can be enough to put the going concern status at risk. A missing signature, expired term, or purely informal arrangement makes it harder to prove the existence of a current, income-earning leasing enterprise. A “handshake lease” is rarely sufficient: SARS looks for legal continuity of the enterprise supported by proper documentation, not just good intentions.

3. The wrong assets are included or excluded

The enterprise must be transferred as a whole, or at least in a form that allows the purchaser to continue trading immediately. Leaving out key operational components (for example, equipment, access or parking rights, revenue streams, or essential service contracts) can break the continuity of the enterprise, with the result that SARS treats the transaction as a standard taxable supply at 15% VAT.

4. Occupation and control don’t align with the enterprise transfer

SARS focuses on substance: on the effective date, does the buyer actually take over an already functioning enterprise? If the buyer only receives keys, but not income, management rights, or the benefit of tenant relationships, SARS is likely to conclude that no going concern has been supplied, and the transaction will not qualify for zero rating.

5. The parties misunderstand the timing and formal requirements

Both parties must be VAT vendors at the time of supply, not only at some later stage when registration is convenient. Several transactions fail because a purchaser “intends to register”, but is not yet registered as a vendor when the deal triggers VAT.

In addition, the written sale agreement should expressly record that:

• An enterprise (or part of an enterprise) is being sold as a going concern; and
• The purchase price is inclusive of VAT at 0%.
• If this wording is missing or unclear, SARS is far more likely to dispute the zero rating.
  
  Why this matters in 2026
  

Commercial property buyers are more sensitive than ever to liquidity, finance costs, and cash flow timing. A misclassified transaction can introduce a sudden 15% VAT exposure, disrupt financing, delay transfer, or cause the deal to collapse entirely.

This is not an accounting issue; it is a legal structuring and documentation issue.

Wright Rose-Innes’ commercial property and conveyancing teams work together to ensure that every going concern sale is correctly structured, clearly documented, and SARS compliant from the outset. In a tight market, certainty is not optional; it is often the difference between a deal that proceeds and one that unravels.

Before you sign, let us check the structure. One review can save your entire deal.

Eliana De Camillis
Graeme Carrington

Disclaimer: This article is the personal opinion/view of the author(s) and does not necessarily present the views of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever, and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken based on this content without further written confirmation by the author(s).