Not every transaction involving the acquisition of immovable property or a portion or share in immovable property attracts transfer duty. Transfer duty is usually calculated on the purchase price, but SARS can call for a valuation and require transfer duty to be paid on the higher of either the purchase price or market value.
SARS will normally call for independent market valuations of at least two estate agents if:
• SARS believes that the purchase price is below market value; or
• The seller and purchaser are connected parties. Connected parties would typically be parties who are related or who share some business relationship.
When SARS calls for independent values which may differ, SARS will usually require transfer duty to be paid on the highest valuation submitted and not on the average of the values.
The purchaser who would normally be liable for payment of transfer duty would be exempt from paying transfer duty on the following transactions:
1. The purchase of property for a purchase price or value of R1 million or less (this threshold is usually re-assessed and raised by Government frequently).
2. The sale of property by a registered VAT vendor that forms part of the seller’s enterprise. This will normally be restricted to the sale of commercial property where the seller is registered for VAT. VAT would be payable and not transfer duty. This exemption would typically exclude the sale of a residential property transaction by a VAT vendor. There will never be a situation when both VAT and transfer duty are payable. It is either one or the other.
3. If you get married in community of property to someone who already owns immovable property, you automatically become owner of 50 % of the property by virtue of the marriage in community of property and no transfer duty is payable by the acquirer of the half share.
4. Should you inherit property as a surviving spouse or heir, no transfer duty is payable for the transfer of the property or share in the property into the surviving spouse or heirs’ name. This will also apply to a redistribution agreement between heirs involving immovable property.
5. Normally transfer duty is exempt if the reason (causa) for the transaction is a court order. Property or a share in property awarded to a former spouse by a court order resulting in a Deed of Divorce Settlement will be exempt from transfer duty.
6. Cancelled transactions will not be subject to payment of any transfer duty provided that neither party nor the agent received any payment as consideration for concluding the cancellation.
If you are unsure of your obligations regarding payment of transfer duty, I suggest that you seek advice from your conveyancer as there are also complicated scenarios which I have not covered such as the exchange of properties with unequal values.
Please also be aware that a sale of shares transaction or sale of member’s interest transaction in a company or close corporation which is essentially a residential property-owning company or corporation will not be exempt from transfer duty and will attract transfer duty even though it is a sale of shares and not a sale of property.
Author: Peter Bowes