Most people are not aware that when you buy immovable property, there are costs
implications such as tax. This tax is called transfer duty and it is levied on the value of any property acquired by any person by way of a sale or donation transaction or a court order or in any other way.
Transfer duty is not to be confused with transfer costs or fees. It is a tax payable to the
South African Revenue Services, being a tax collecting agency of the Republic of South
Africa. This tax is payable by the purchaser of the property, prior to the transfer of the
property in the relevant deeds office.
At present, transfer duty will be exempted in the following instances, when: -
1. the value of the property or purchase price is under R1 000 000.00;
2. the seller is a registered VAT Vendor and the property is part of the seller’s
enterprise. In this instance, VAT is payable and not transfer duty; or
3. the property is being sold as part of a going concern. In this regard and subject to
certain requirements, VAT at a rate of zero percent may be applicable.
Transfer duty is payable within six months from the date of the conclusion of the transaction, such as the agreement of sale. If the transfer duty is not paid within this period, a penalty interest calculated at 10% per annum for each completed month becomes payable. A completed month is calculated as the first day from the expiry of the interest free 6-month period to the date of payment.
At present, being the period between 1 March 2020 - 28 February 2021, transfer duty is
calculated as follows: -
Value of the property (R) Rate
1 – 1000 000 0%
1 000 001 – 1 375 000 3% of the value above R1 000 000
1 375 001 – 1 925 000 R11 250 + 6% of the value above R 1 375 000
1 925 001 – 2 475 000 R44 250 + 8% of the value above R 1 925 000
2 475 001 – 11 000 000 R88 250 +11% of the value above R2 475 000
11 000 001 and above R1 026 000 + 13% of the value exceeding R11 000 000
In addition to the transfer duty or VAT as aforesaid, there are further costs payable to the conveyancers attending to the registration of the transfer and the mortgage bond where applicable. These costs are calculated according to a standard tariff issued by the Legal Practice Council, read with the tariff of Deeds office. The costs payable by the seller are not the same as those payable by the purchaser. For example, the seller may be required to pay the costs of cancelling an existing mortgage bond, municipal rates and taxes and levies. Even though it may be the default position, the parties to an agreement can agree otherwise. It is therefore important to consult a conveyancer before concluding an agreement of sale or offer to purchase an immovable property.
This article is written simply for the purposes of making the readers aware of certain
provisions and does not in any way serve as an advice to any reader and in the event that any person requires advice on the above, you may contact us or consult your attorney.
Written by Kim Slaffa, candidate legal practitioner in the firm.
