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The transfer duty you can expect to pay in South Africa

Transfer duty is a tax payable on all types of properties and is owed over and above the selling price. But who pays it and how is it calculated?

Transfer Duty

Article summary

  • A property transfer duty is a tax payable by buyers of all types of properties purchased for more than R900 000.
  • Transfer duty is owed over and above the selling price and is based on the value, not the price of the property.
  • Acquiring a property through marriage in community of property, divorce, inheritance, when a property transaction is cancelled and VAT transactions are some of the instances when transfer duty exemptions apply.

Video summary

According to the Transfer Duty Act, property transfer duty is a tax payable by buyers of all types of properties and is owed over and above the selling price.

Rhys Dyer, CEO of ooba home loans, South Africa’s largest home loan comparison service, explains that transfer duty should not be confused with transfer costs, which include all the expenses associated with a property transfer, such as the cost of registering a bond and conveyancing fees.

Here, ooba home loans’ guide to everything you should know about transfer duty.

Who pays transfer duty?

When a home is acquired by a buyer, he or she becomes liable for transfer duty. Like all sale-and-purchase agreements in this country, the date of acquisition is considered to be the date on which the transaction was entered into – that is, the date on which the last-contracting party signed the agreement. Dyer notes that this rule applies regardless of whether the agreement is subject to conditions, such as the seller accepting the purchase offer only when the buyer obtains a bond – in this case, for instance, transfer duty applies from the date of the offer, not the date on which financing is approved.

How is transfer duty calculated?

Transfer duty is calculated on the value – not the price – of the property, although, as Dyer explains, SARS will generally regard the purchase price of the property to be its value. However, he points out that if SARS believes that the purchase price does not correspond with the true value, which may be the case if, say, a property is sold to a family member and its value understated, transfer duty will have to be paid on the true or fair value.

Transfer duty is calculated on the total cost of the property to the buyer.

Transfer duty rates for 2019/2020

These are the transfer duty rates applicable on property purchased on or after 1 March 2017.

Value of property (R)

Rate

0 – 900 000

No transfer duty

900 001 – 1 250 000

3% of the value above R900 000

1 250 001 – 1 750 000

R10 500 + 6% of the value above R1 250 000

1 750 001 – 2 250 000

R40 500 + 8% of the value above R1 750 000

2 250 001 – 10 000 000

R80 500 + 11% of the value above R2 250 000

10 000 001 and above

R933 000 + 13% of the value above R10 000 000

When VAT replaces transfer duty

By law, a transaction cannot be subject to both VAT and transfer duty and, in a property transaction, the payment of VAT always takes precedence over that of transfer duty where the seller is a VAT vendor. Developers often use this marketing ploy to entice prospective buyers, offering homes with no transfer duty. Instead, buyers pay VAT on these homes, but this is more often than not included in the purchase price.

Transfer duty exemptions

Property transfers are exempt from transfer duty in the following circumstances:

  • Marriage in community of property. If someone who owns a property gets married in community of property, the spouse will automatically become the owner of a half-share of the property, without paying any transfer duty.
  • Divorce. Transfer duty does not apply if a property is awarded to a spouse in terms of a divorce order. The exemption applies to all marital regimes and to civil unions. However, if the property is not awarded to a spouse in terms of a divorce order and the parties reach an agreement outside of the formal divorce proceedings, the spouse who acquires the property will be liable for transfer duty.
  • Inheritance. Heirs and beneficiaries are exempt from paying transfer duty on property inherited from a deceased estate, regardless of the nature of their relationship with the deceased and irrespective of whether or not the deceased died without a valid will.
  • Cancelled transactions. If a property purchase is cancelled before the transfer is registered at the Deeds Office, there is no liability for transfer duty if SARS is satisfied that the cancellation is legitimate.

 

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VAT Increase Disclaimer

Effective 1 April 2018, by order of National Treasury, Value-Added Tax (VAT) will increase from 14% to 15%.

Please note that this increase will retroactively effect VAT-inclusive calculations in articles contained in our website.