What is Transfer Duty?

SARS defines Transfer Duty as a tax levied on the value of any property acquired by any person by way of a transaction or in any other way. Property acquired by both a natural and juristic persons.

Property –

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.

Caution should be applied when dealing with Transfer duty so as to not confuse it with transfer costs, which are essentially all the expenses associated with a property transfer, such as conveyancing fees and the cost of registering a mortgage bond.

The person who becomes liable to pay transfer duty will be the person acquiring the property or person who will benefit from any interest in or restriction on the property once it has been renounced. Transfer duty is payable to the South African Revenue Service (SARS).

The buyer pays transfer duty

The duty payable on the acquisition of that property will be based on the greater of –

• The amount paid or received for the property; or

• The fair/market value of the property as determined by the Commissioner.

When you declare your Transfer Duty to SARS, the commissioner is permitted to assess the value of the property and the consideration agreed upon. Should the commissioner assess that the consideration being paid is much less than what he assessed the value of the property to be, then he can reject your declaration for you to declare with the fair value as he would have determined it to be.

When should Transfer Duty be paid?

Duty is payable within six (6) months from the date of acquisition. If the Transfer Duty is not paid within this period, interest is calculated and charged at the “prescribed rate” currently 10% per annum for each completed month. A completed month is calculated as the first day from the expiry of the interest free 6 month period to the date of payment.

In the case of conditional sales, the period of 6 months commences from the date on which the transaction was entered into (i.e. the last date of party signature to the agreement), and not the date when the contract becomes binding upon the parties (i.e. the date the conditions are fulfilled.)

What are we saying? If you sign an agreement of purchase today with the option to pay the full purchase price 2 years later, Transfer Duty is still due 6 months as of today! Regardless of when you’re paying the full purchase price.

Do I pay both Transfer Duty and VAT?

The sale of property can’t be subject to both VAT and Transfer duty. If the seller is VAT registered and the property being sold is part of his enterprise then VAT will be levied on the transaction. Should the seller not be VAT registered or the property sold does not form part of his enterprise then Transfer Duty is levied. VAT takes preference over Transfer Duty and which one the buyer is paying will be determined by the property status of the seller.

How do I determine how much Transfer Duty to pay?

These are the Transfer Duty rates applied to properties acquired on or after 1 March 2017 and apply to all persons (including natural persons, companies and trusts)

REFERENCES:

‘What is Transfer duty’ and ‘Transfer duty rates’ found at: http://www.sars.gov.za/TaxTypes/TransferDuty/Pages/default.aspx (accessed 24/08/2017)

‘Penalty interest rate’ found at

http://www.sars.gov.za/TaxTypes/TransferDuty/Pages/Transfer-Duty-Penalty-Interest-Rates.aspx (accessed 24/08/2017)