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Transfer Duty: The Essentials of Transfer Duty

Transfer Duty: The Essentials of Transfer Duty

From 1 March 2017, the threshold at which transfer duty becomes payable was raised from R750,000.00 to R900,000.00 – in other words, transactions entered into involving transfer of interests in immovable property after that date, will not attract transfer duty, where the purchase price, or fair market value of the property (whichever is greater), is less than R900,000.00.

Transfer duty payable in respect of a proposed transaction is a factor all property investors must take into account, in calculating the costs of the transaction. The rate of transfer duty – normally payable by the Purchaser - varies from 3% on the value of the property over R900,000.00, to R933,000.00 plus 13% on the value of the property over R10 million.

Some essential transfer duty facts to remember:

  1. If the Seller is a VAT vendor, for purposes of the transaction, transfer duty would not be payable. However, the transaction would be subject to VAT. Be sure that the Deed of Sale is explicit in this regard.
  1. Transfer of property to an heir, pursuant to a Will or by virtue of intestate succession, is exempt from transfer duty, as is a transfer to a party acquiring the property pursuant to a divorce order.
  1. Transfer duty is calculated by reference to the relevant share in the transfer duty payable on the full value of the property. For example, X acquires from Y, a one-half share in a property valued at R1 million. At first glance, it may seem that no transfer duty is payable, as the one-half share is worth R500,000.00. However, X must in fact pay transfer duty equal to half the transfer duty payable on R1 million – i.e. 50% of R3,000.00, or R1,500.00. Not much, but as values escalate, the implications become significant.
  1. Transfer Duty is payable within six months of date of acquisition of the property – failing which, interest becomes payable on unpaid Duty.
  1. “Property”, for the purposes of transfer duty, includes shares or member’s interest in a “residential property company”. Therefore, be aware that acquisition of shares or member’s interest may also well give rise to a liability for transfer duty.

Transfer duty and other tax implications of property transactions can be a minefield, and every case has its particular circumstances. Prospective sellers and buyers would do well to consult a property law professional before entering into a transaction involving immovable property, to ensure their rights are protected and the transaction is tax efficient.

At Goldberg & de Villiers Inc, the Directors in our Property Law Department, namely Adri Ludorf, Tracey Watson-Gill and Nicholas Mitchell, assisted by Bardine Hall and a team of highly-qualified paralegals, will gladly assist you with any of your Property Law-related needs.

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