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When will transfer duty be levied on the sale of a member’s interest in a close corporation?

Tuesday, 12 May 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: I have a client who’s about to sell his member’s interest in his Close Corporation. The only asset in the CC is a property being used for commercial purposes although there isn't any business rights on the property.

Besides CGT, what other taxes would apply to this transaction?

I am unsure if there will be transfer duty payable on the transfer of the members interest in the CC.

A: Transfer duty is payable on the sale of shares of a residential property company as defined in the Transfer Duty Act, the former being a company holding residential property as defined in s1. Residential property includes any dwelling or unimproved land zoned for residential use.

Therefore if it is a residential property which is bought for commercial purposes but have not been rezoned for commercial use the shares will in our view fall within the definition and be subject to transfer duty.

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.



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