In this article the writer wishes to answer the questions that a prudent person who is contemplating making an offer to purchase a property would ask especially in respect of the distinction between Transfer Duty and Transfer costs that are required in addition to the purchase price of the property, which are payable to the transferring Attorney (Conveyancer) before the property could be transferred in their name at the deeds office.
WHAT IS TRANSFER DUTY?
Transfer duty is a tax levied by the South African Receiver of Revenue (“SARS”) on acquisition of a property either on the value of the property or purchase price, whichever is higher. This tax is imposed in terms of section 2 of the Transfer Duty Act 49 of 1940 (“the Act”) and is paid during the transfer process. This tax becomes payable on the date of acquisition of the property, that is, the date when the last party to the sale agreement signs the deed of sale (commonly known as “offer to purchase”).
Significant to note that the Act provides for numerous transfer duty exemptions in terms of section 9. And perhaps the most common exemption is where the seller is a “vendor” as defined in terms of the Value Added Tax Act 89 of 1991 (think a property developer of a newly developed sectional title scheme), such a transaction would be exempt from transfer duty, and Value Added Tax at a rate of 15% on the purchase price would be levied by the vendor for the benefit of the receiver of revenue.
WHO PAYS THE TRANSFER DUTY?
In terms of section 2 of the Act, the person who acquires the property (the purchaser) is liable for the payment of transfer duty.
WHEN IS TRANSFER DUTY PAYABLE?
Section 3 of the Act provides that transfer duty is payable within six month from the date of acquisition. And section 4 of the Act further provides that if transfer duty is not paid within the stipulated period, a penalty at a rate of 10% per annum on the amount of unpaid duty for each month completed shall be imposed by the commissioner of SARS.
WHO MAKES THE PAYMENT TO SARS?
The appointed Conveyancer is responsible for making the payment of transfer duty to SARS on behalf of the purchaser. The Conveyancer only acts as the agent of SARS by collecting this tax from the purchaser for the benefit of the receiver of revenue.
WHAT IS THE CURRENT TRANSFER DUTY THRESHOLD?
The following transfer duty rates apply to the properties acquired after 01 March 2020, and they apply to all persons (including companies, close corporations and trusts). The current transfer duty threshold is R1 000,000.00 (One Million Rand), in other words, all the properties valued below the mentioned amount are exempted from the payment of transfer duty.
The following are the current transfer duty rates:
| Value of the property | Rates |
| 1 – 1 000,000 | 0% |
| 1 000, 001 – 1 375, 000. | 3% of the value above R1 000 000 |
| 1 375,001 – 1 925, 000. | 11250 + 6% of the value above R1 375,000 |
| 1 925, 001 – 2 475,000. | 44 250 + 8% of the value above R1 925 000 |
| 2 475 001 – 11 000, 000 | 88 250 + 11% of the value above R2 475 000 |
| 11 000, 001 and above | 1 026, 000 + 13% of the value exceeding R11 000,000 |
TRANSFER COSTS:
Regardless of whether the Transfer Duty is payable to SARS or not, the purchaser is still responsible for the transfer costs payable to the Conveyancer appointed to attend to the transfer and registration of the property at the deeds office. And where the purchaser is financing the transaction through a loan and the creditor requires a mortgage bond to be registered against the title deed of the property, bond registration costs would be payable to the bond attorney (Conveyancer) appointed to execute such bond registration at the deeds office. These costs are tariff-based and are prescribed by relevant Legal Practice Council (“the Council). Conveyancer’s fees are billed on the purchase price/value of the property or bond amount (if applicable) in accordance with the tariffs prescribed by the Council. However, these fees are negotiable.
In addition to the prescribed fees or such negotiated fees, the Conveyancer is entitled to recover the reasonable disbursements, namely; postages & petties, rates clearance certificate, SARS E-filling, electronic document generation, deeds registration fees etc. If the property is a unit in a sectional title scheme, additional costs for levy certificate from the body corporate; and/or costs to obtain written consent to transfer from Homeowners’ association (if applicable).
Normally, the Conveyancer will send estimated transfer costs that are required for the transaction by means of a pro forma invoice, this invoice itemises the costs that are payable to the Conveyancer appointed to transfer the property from the seller to the purchaser. The purchaser must ensure that he or she has the funds to pay for these costs.
CONCLUSION:
When you are planning on buying a property, it is important to factor in the transfer duty and transfer costs in addition to the purchase price of the property.
The content of this article is intended to provide a general guide to the subject matter. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Contact us for bespoke legal advice on info@rnkinc.co.za
By Ndivho Netsianda
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