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Taxation
Tuesday, July 1, 2008
Property impost

Transfer duty is a form of government tax that was introduced as long ago as the 17th century and is still relevant to most property transactions today. It is not to be confused with transfer fees or costs, but is imposed in terms of the Transfer Duty Act and, generally speaking, is payable when immovable property is acquired.
Transfer duty is payable by the purchaser to the South African Revenue Service (SARS) and is calculated as a percentage of the purchase price. The rates of transfer duty are specified in the Act. If no purchase price is payable or if SARS is of the opinion that the purchase price is less than the fair value of the property, then it will calculate the transfer duty based on fair value.
By way of example, using the current transfer duty rates, which have applied since 1st March 2006, transfer duty payable on a purchase price of R2 million is calculated as follows:
• if the purchaser is a company, close corporation or trust, transfer duty is 8% of the purchase price = R160 000
• if the purchaser is an individual, transfer duty is:
o 0% on the first R500 000 of the purchase price (R Nil);
o 5% on the amount from R500 000 to R1 million (R25 000); and
o 8% on the amount over R1 million (R80 000)
• Total transfer duty = R105 000

Transfer duty is payable within six months from the date of acquisition. In most cases this will be six months from the date the sale agreement was signed. If the transfer duty is not paid within this time period, penalty interest will be charged by SARS.
In terms of the Act, the Deeds Office is not permitted to register a transfer unless there is proof that transfer duty has been paid or that no transfer duty is payable. This means that a purchaser is required to pay transfer duty prior to the transfer being lodged in the Deeds Office so that the conveyancer can obtain a transfer duty receipt or exemption certificate from SARS for submission to the Deeds Office.
A purchaser does not pay transfer duty in transactions where VAT is payable. This is where the seller is a VAT vendor and the sale of the property is in the course of the seller’s business e.g. a property developer. In such instances, the purchaser will pay the purchase price and VAT to the seller who is then responsible for paying the VAT to SARS. By Victoria Hodgon, an Associate in the conveyancing department at Garlicke & Bousfield Inc.
 

Copyright © Insurance Times and Investments® Vol:21.6 1st July, 2008
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