Are Auction Houses Allowed to Charge VAT on SUVs?

Are Auction Houses Allowed to Charge VAT on SUVs?

• 04 July 2025
• VAT
• The Tax Faculty Tax Specialist

This article is based on tax law for the year ending 29 February 2026.

Question:

Vehicles, including SUVs, are purchased from auction houses, refurbished, and sold as trading stock. A claim has been made that it is illegal for auction houses to charge VAT on SUV vehicles. This analysis seeks to confirm the accuracy of that claim and clarify the correct VAT treatment.

Answer:

The Problem / Facts

Vehicles, including SUVs, are purchased from auction houses, refurbished, and sold as trading stock. A claim has been made that it is illegal for auction houses to charge VAT on SUV vehicles. This analysis seeks to confirm the accuracy of that claim and clarify the correct VAT treatment.

Analysis of the Tax Issues Identified in the Question

The key tax issue is whether auction houses are legally permitted to charge VAT on the sale of SUV vehicles. This involves evaluating the VAT status of motor vehicles—particularly SUVs—when sold as trading stock via auction, and determining whether any exemptions or special provisions apply.

List of Tax Issues with the Relevant Sections of the Tax Legislation

• Whether the sale of SUVs by auction houses attracts output VAT (VAT Act 89 of 1991, Section 17(2)(c)).

• Definition of “motor vehicle” and potential exemptions (VAT Act, Section 1; SARS VAT 420 Guide).

• VAT compliance obligations applicable to auctioneers and vendors (VAT Act, Section 54).

Application of the Law to the Facts

According to Section 17(2)(c) of the VAT Act, VAT is levied on the supply of goods or services by a vendor in the course of an enterprise. SUV sales by VAT-registered auction houses constitute standard-rated taxable supplies unless a specific exemption or zero-rating applies. SUVs fall under the definition of “motor vehicle” as per Section 1 of the VAT Act, and there is no provision in the Act or in SARS’s VAT 420 Guide that exempts SUVs from VAT in typical commercial transactions.

Furthermore, there are no SARS rulings or guidance that prohibit or restrict auction houses from charging VAT on SUVs. VAT-registered auction houses are, in fact, required to charge VAT on such sales, unless the vehicle qualifies for a specific exemption—such as those applicable to non-motor vehicles or donations to approved welfare organisations—which is not relevant in this context.

Conclusion

The assertion that it is illegal for auction houses to charge VAT on SUV vehicles is incorrect. VAT-registered auction houses are legally required to levy output VAT on the sale of SUVs, as these transactions represent taxable supplies made in the ordinary course of business. No exemption applies to SUVs sold as trading stock.

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