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Transfer duty simplified

10 April 2013   (0 Comments)
Posted by: Author: Charl Geldenhuys
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Source: Charl Geldenhuys

Transfer duty is a tax levied in terms of the Transfer Duty Act on any immovable property which is acquired by way of a transaction or otherwise. Transaction or otherwise includes the sale, grand, ceding, donation or exchange of property. The person who becomes  liable to pay transfer duty will either be the person acquiring the property or the person in whose favour, or who will benefit from any interest in or restriction on, the property has been renounced. Transfer duty are payable to the South African Revenue Service (SARS).

Property means land and any fixtures thereon and includes:

  • Real rights in land, excluding rights under mortgage bonds or leases;
  • A lease or sub lease of any lot which is registered at the Rand Townships Registrar;
  • Rights to minerals or the rights to mine for minerals including leases or sub leases to mine for minerals;
  • A share or member’s interest in a residential property company;
  • A contingent right to residential property or share or member’s interest in a residential property company; or
  • A share in a share blocks company.

Transfer duty becomes payable within six months after the acquisition date. Failing to pay the transfer duty on time will lead to additional interest charges. Transactions with suspensive conditions will not delay the liability to pay transfer duty. The date of acquisition refers to the date a transaction was entered into for acquiring the property. Where the property was acquired otherwise than by way of a transaction, the acquisition date will be the date when the person whom is acquiring the property becomes entitled to it.

Transfer Rates 

The transfer rates applicable to transactions entered into after 23 February 2011 are:

  • 0% on the value of property not exceeding R600 000;
  • 3% on the value of property exceeding R600 000, but not exceeding R1 000 000;
  • 5% on the value of property exceeding R1 000 000, but not exceeding R1 500 000; or
  • 8% on the value of property exceeding R1500 000.

Interest charges are levied at 10% per annum on each completed month until the date of payment is made.

Transfer Duty and VAT

Can the sale of property be subject to both transfer duty and VAT? The sale of property cannot be subject to both. If the person who is selling the property is a registered VAT vendor and the property falls within his enterprise, then VAT will be levied on the transaction. If the person who is selling the property is not a registered VAT vendor, or the property falls outside his enterprise, then VAT will not be levied but transfer duty will be. Thus, VAT will take preference over transfer duty and the seller will have to determine whether the transaction will be subject to transfer duty or VAT.

Value of property

Transfer duty will become payable on the consideration paid for the property in an arm’s length transaction. Commission fees paid by the purchaser must also be added to the consideration for purposes of calculating the transfer duty. If the Commissioner is not satisfied with the consideration or declared value, he will be entitled to determine a new fair value. The Commissioner may request independent valuers to determine the property’s fair value in writing. These independent valuers referred to will be your estate agents and sworn appraisers. Fair value refers to the fair market value of the property on the date of acquisition. Fair market value refers to the price of property determined between a willing buyer and seller dealing at arm’s length in the open market.

Therefore, transfer duties are not a difficult or complicated tax to administer. Any additional interest charges will be avoided when taking due care and the new owners can enter the property with a smile.

List of References

Anon. 2013. Transfer duty, [Online] Available from: http://www.sars.gov.za/home.asp?pid=192 [Accessed: 10-04-2013].

South Africa. 1950. Transfer Duty Act, No. 40 of 1949. Government Gazette, [Online] Available from: http://www.lawsoc.co.za/upload/files/transferdutyact.htm [Accessed: 10-04-2013].




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