TRANSFER DUTY
Transfer duty is paid by the purchaser on the acquisition of any immovable property. It is payable to the Receiver of Revenue (Sars) on all transactions that are not subject to VAT (properties worth less than R1 100 000 are exempt from transfer duty). The rate is based on a sliding scale that applies equally to natural persons, companies, close corporations, and trusts that purchase property.
Transfer duty is also payable on the transfer of a member’s interest in a close corporation owning residential property, on the transfer of shares in a property-owning company, and on the transfer of the beneficial interest in a trust holding property.
Note that if a purchaser signs an agreement of sale personally while reserving the right to nominate another person or entity as purchaser (usually within a stipulated period), then the nominee must be appointed on the same date as signing the agreement. If the nominee is appointed later, SARS will construe it as a subsequent sale transaction, and double transfer duty will be payable. A purchaser must therefore have a clear idea of the entity in which he intends to acquire ownership at the time of contracting, since a nomination (and acceptance thereof by the nominee) offers too little time to make an informed decision.
If a purchaser chooses to buy a property in a company that is not yet formed, the agreement of sale must be signed by the purchaser “on behalf of the company to be formed.” Once the company is formed, it must ratify the decision to purchase the immovable property. Note that the Trust Property Control Act does not provide for the acquisition of immovable property on behalf of a trust that is not yet in existence, and it is therefore not possible to do so.
| 1 – 1 100 000 | 0% |
| 1 100 001 – 1 512 500 | 3% of the value above R1 100 000 |
| 1 512 501 – 2 117 500 | R12 375 + 6% of the value above R 1 512 500 |
| 2 117 501 – 2 722 500 | R48 675 + 8% of the value above R 2 117 500 |
| 2 722 501 – 12 100 000 | R97 075 +11% of the value above R2 722 500 |
| 12 100 001 and above | R1 128 600 + 13% of the value exceeding R12 100 000 |
VAT
Purchasers must keep in mind that no transfer duty is payable if the transaction attracts VAT. If VAT is payable, the seller is liable to pay it over to SARS. The deed of sale must indicate whether the purchase price includes or excludes VAT. If the property is being sold as part of a going concern and both the seller and purchaser are VAT registered, then the transaction will be “zero-rated” for VAT. The Deed of sale must then stipulate that the property is being sold as part of a going concern. When VAT is payable, it is important to ensure that the parties are up to date with the filing of their VAT returns with SARS; otherwise, delays will ensue since SARS will not issue a receipt until the parties are compliant.
CAPITAL GAINS TAX INDIVIDUALS AND ENTITIES
The first R2 million of any profit made on the sale of a property by an individual is exempt from CGT, provided the property in question constitutes the individual’s primary residence. This applies to South African residents only.
- The capital gain is calculated by subtracting the base cost of the property, which includes incurred costs such as renovations, transfer costs, and attorney fees, from the amount you sold it for.
- The inclusion rate (only 40% of the capital gain will be taxed if you’re an individual and 80% if it’s a company or trust selling the property).
- The tax rate. As of February 2024, the marginal tax rate is 18% for individuals, 21.6% for businesses, and 36% for other trusts.
- Capital gains on a primary residence (the residence in which the home seller lives) are excluded up to a rate of R2 000 000.
- If you and your spouse own a joint bond, the exclusion of R2 000 000 is split between you, so you each qualify for an exclusion of R1 000 000.
- Capital gains tax on a second property in South Africa qualifies for an exclusion rate of R40 000.
ESTATE DUTY
Estate Duty on the death of the individual, his/her estate (including the immovable property held in his/her individual capacity) with certain deductions, will be subject to estate duty. As of 21 February 2024 no changes from last year.
Estate duty is levied on the property of residents and South African property of non-residents less allowable deductions. The duty is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% above R30 million. A basic deduction of R3.5 million is allowed in the determination of an estate’s liability for estate duty, as well as deductions for liabilities, bequests to public benefit organisations and property accruing to surviving spouses.
Join The Discussion