Transfer duty and VAT

What to consider when purchasing a property

Either VAT (Value Added Tax) or Transfer duty will always be payable with the purchase or acquisition of a property. Conveyancing attorneys need to register with SARS and report the details of each property transaction to them in order to obtain a transfer duty receipt, which is required to transfer a property. This receipt needs to be lodged whether VAT or Transfer duty is payable.

When is VAT payable:

VAT is the tax levied on the supply of goods and services by a VAT vendor. The seller’s tax status and the nature of the transaction determines whether VAT will be payable. If a property is sold as a going concern and certain requirements are met, VAT will be payable at a zero-rate. If not otherwise indicated in the agreement of sale, the purchase price is inclusive of VAT. The seller must take care to calculate the purchase price accordingly. The seller shall be deemed to be responsible to pay VAT at the rate determined annually (Currently 15%) and it is the seller’s responsibility to process the VAT in accordance with legislation and pay the VAT over to SARS. 

When Transfer duty payable:

Transfer duty is the tax levied when a property is purchased or acquired in any way and is determined on the purchase price or reasonable market value of the property, whichever is higher. If the seller is not registered for VAT or if the transaction is not related to the seller’s business, then Transfer duty will be payable. The Purchaser is responsible for paying transfer duty to SARS (The South African Revenue Service) which needs to be paid within 6 months of the date of transaction, otherwise, penalty interest will be charged. Certain transactions are exempt from paying transfer duty which transactions are stipulated in Section 9 of the Transfer Duty Act No. 40 of 1949. These are transactions like the inheritance of a property or transfer in terms of a divorce order, for example. The rate at which transfer duty is levied is determined annually by a scale published by the minister and for 1 March 2020 – 28 February 2021 will be 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

When in doubt:

The payment of either VAT or Transfer duty can have a great impact on transactions and specifically the financial implications thereof. Sellers and Purchasers who are uncertain of whether VAT of Transfer duty will be payable are advised to consult their Conveyancing attorney for guidance in this regard. 

Written by Lizelle Taljaard