VAT and Transfer Duty

Property Law encompasses inter alia matters relating to Value Added Tax (VAT), Transfer Duty and Capital Gains Tax (CGT), which fall in the sphere of the South African Tax Law.

To explain the place of VAT and Transfer Duty in Property Law, we distinguish between what we call VAT and/or Transfer Duty transactions.

A VAT transaction is where the Seller is a registered VAT vendor. In this case, the Purchaser will not be liable to pay Transfer Duty to the Receiver of Revenue, because the Seller will ultimately pay VAT on the transaction to the Receiver, and therefore it is labeled a “VAT Transaction”.



In the case where the Seller is not a VAT registered vendor, the Purchaser is liable to pay Transfer Duty on the transaction to the Receiver of Revenue, and therefore it is then labeled a “Transfer Duty transaction”.

VAT payable in the case of a VAT transaction, is payable according to the normal scales, currently 14% on the purchase price (or selling price) of the property. The purchase price must be quoted in the Contract of Purchase and must indicate whether VAT is included or excluded.  If VAT is not specifically excluded, the purchase price will be deemed to include VAT. This can have serious consequences for the Seller.

The calculation of Transfer Duty is calculated by way of a sliding scale, which is promulgated in the Government Gazette by the Minister of Finance from time to time. Presently Transfer Duty is calculated according to the following scales:

Natural and Juristic Persons (in respect of Deeds of Sale signed on or after 23 February 2011

 

Value of Property Transfer duty rate
On the value of the property that does not exceed R600 000 0%
On the value of the property that exceeds R600 000, but not
R1 000 000		 3%
On the value of the property that exceeds R1 000 000, but not
R1 500 000		 R12 000 plus 5% on the value exceeding R1 000 000
On the value of the property that exceeds R1 500 000

R37 000 plus 8% on the value that exceeds R1 500 000

Where Deeds of Sale were signed prior to 23 February 2011, the undermentioned scales will still be applicable:

a) Natural Person

Value of Property Transfer duty rate
First R500 000 of cost of immovable property 0%
R500 000 to R1 000 000 5% of the value above R500 000
R1 000 000 and above R25 000 plus 8% of the value above
R1 000 000

b) Companies, Close Corporations and Trusts pay 8% on the purchase price.