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  1. #1
    Join Date
    Jun 2004
    Location
    Auckland
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    2,103

    Default What if the vendor is not GST-registered

    I'm looking at a retail unit with ownership being name of a person. At this stage I don't know if the person is gst-registered or not. Say, if the vendor is not gst-registered, when I buy the property with tenant still in place, is it still zero rated? Or, do I pay GST and then claim it back later? What will happen to the vendor if he is not GST registered? Thanks

  2. #2

    Default

    Hi fudosan

    If the vendor is not GST-registered. then the vendor cannot charge GST, but YOU would be able to claim GST as your input cost. This is because the purchase would be similar to purchasing a second-hand item from a non-GST person.

    This is good in that the cost of the purchase is reduced for you.

  3. #3
    Join Date
    Jun 2004
    Location
    Auckland
    Posts
    2,103

    Default

    Hello Learner. Long time no "hear" from you.

    I'm actually puzzled by the idea that you can get your purchasing cost reduced by being able to claim GST on either a vacant property or in this case from a non gst-registered vendor.

    Since most if not all commercial properties that I have come across are listed as PRICE + GST, the end result is always the same regardless of the GST issue.

    1. For zero-rated transactions, I pay the PRICE only.
    2. If property is vacant, I pay the PRICE + GST and then claim GST back later.
    3. For the current case, still I pay the PRICE + GST and then claim GST back later.

    In all of above, the purchaser does not enjoy any advantage in price reduction. Am I missing something in my logic?

  4. #4

    Default

    Hi fudosan

    I think you will find that a non-GST registered vendor will sell the property inclusive of GST as GST cannot be charged. The GST would have have been paid with the original purchase, but it was not claimable as the purchaser (now the vendor) was not GST registered.

    If a GST-registered purchaser buys the property now, then the purchaser can claim one ninth of the price (which is GST inclusive, NOT price PLUS GST as you had thought).

    This is explained on page 41 of the GST Guide (IR375) February 2008 edition, which details that second-hand goods include land, and if the vendor is not GST-registered, then you may claim the GST without a GST invoice, but that you must record the name and address of the supplier, date of purchase, description of goods, price paid etc.

    However, to be doubly sure, check with someone who knows!

    That is why if may be an advantage to purchase commercial property from a non-GST registered vendor, because the price should be lower than usual. Why a commercial property owner is not GST-registered is something I don't understand.

  5. #5
    Join Date
    Jan 2004
    Location
    Whangarei
    Posts
    5,867

    Default

    Hi Fudosan,

    If the vendor is not registered for GST, they can't ask for price+gst. However, you can still claim GST.

  6. #6
    Join Date
    Jun 2004
    Location
    Auckland
    Posts
    2,103

    Default

    Silly me. I should have understood that non gst-registered vendor cannot charge price+gst. But what about vendor selling a vacant property? Same rule and therefore just price (but not +gst)?

  7. #7
    Join Date
    Jan 2004
    Location
    Whangarei
    Posts
    5,867

    Default

    I don't think it makes any difference if the property is vacant or not.

  8. #8
    Join Date
    Jun 2004
    Location
    Auckland
    Posts
    2,103

    Default

    Quote Originally Posted by fudosan View Post
    But what about vendor selling a vacant property? Same rule and therefore just price (but not +gst)?
    I meant GST-registered vendor selling a vacant property

  9. #9
    Join Date
    Jan 2004
    Location
    Whangarei
    Posts
    5,867

    Default

    Well, they can charge plus GST or not. It doesn't really matter. The point is that if they are GST registered, then they pay GST. You claim GST on whatever you pay, plus or inc.

  10. #10
    Join Date
    Sep 2008
    Location
    Auckland
    Posts
    114

    Default

    My understanding is that a GST registered vendor selling a vacant building (ie 'not a going concern' in tax jargon) should be charging GST which then the purchaser claims back. A bit silly really.

    Unless a transaction is very straight forward I always obtain written tax advise from a recognised GST specialist (about $150 from memory) to cover myself in any tax audit.


 

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