Every transfer of immovable property is subject to either VAT or transfer duty. In order to determine which one is applicable we look at the status of the seller.
If the seller is a VAT vendor for purposes of the transaction, VAT will be payable by the seller to SARS either at a rate of 15% or zero-rated (0%). In this case a Transfer Duty Exemption certificate is lodged in the Deeds Office with the other documents. Parties to the contract must clearly stipulate whether VAT is included or excluded in the purchase price. It is important to note that there are various exemptions listed in section 12 of the Value-Added Tax Act 89 of 1991.
A transfer will be zero-rated if the following conditions are met and are reflected in the contract. If they are not listed in the contract or one of the below is not applicable, VAT will be charged at 15%.
- Seller and purchaser must be a VAT vendor;
- Seller and purchaser agree in writing that the sale is one of a going concern;
- Seller and purchaser agree in writing that from date of registration the enterprise will be an income earning activity;
- The consideration payable includes VAT at a zero rate.
If the seller is not a VAT vendor for purpose of the transaction, then transfer duty will be applicable. Transfer duty is calculated on the higher of the purchase price or the value of the property. The below sliding scale is used to calculate the transfer duty amount payable to SARS by the purchaser on each transaction.
|VALUE OF PROPERTY||RATE|
|R0 – R900 000||0%|
|R900 000 – R1 250 000||3% OF VALUE ABOVE R900 000|
|R1 250 000 – R1 750 000||6% OF VALUE ABOVE R1 250 000|
|R1 750 000 – R2 250 000||8% OF VALUE ABOVE R1 750 000|
|R2 250 000 – R10 000 000||11% OF VALUE ABOVE R2 250 000|
|R10 000 000 and above||13% OF VALUE ABOVE R10 000 000|
Once the amount has been paid over to SARS, SARS will issue a Transfer Duty Receipt which will then be lodged in the Deeds Office.
In terms of section 4 of the Transfer Duty Act 40 of 1949, should the purchaser not pay SARS within 6 months from date of signature of the contract then he/she will be liable for a penalty amounting to 10% per annum on the amount outstanding for each completed month after the first 6 months.
Section 9 of the Transfer Duty Act 40 of 1949 lists various scenarios where the purchaser will be exempt from paying transfer duty to SARS, e.g. a party acquires property by inheritance. In this instance a Transfer Duty Exemption from SARS is lodge in the Deeds Office.
BRONWYN BUTT specializes in Conveyancing and is a Senior associate at Alan Levy Attorneys Notaries and Conveyancers.