Transfer duty and transfer costs
05 Oct 2020
When purchasing a property, there is often confusion when it comes to distinguishing between transfer duty and transfer costs.
In respect of property acquisitions, transfer duty is a tax levied by SARS on all properties purchased. This tax is paid to SARS during the transfer process and is commonly known as “transfer duty”. Prior to 1st March 2020, the transfer duty exemption threshold was R900,000.00. This threshold was increased to R1,000,000.00, which increase was announced in our 2020 budget speech. This exemption is applicable to all property purchases, irrespective of the type of property being purchased.
This means that properties purchased prior to 1st March 2020 at a purchase price or value of R900,000.00 or less would not attract any transfer duty payable to SARS. Similarly, any properties purchased on or after 1st March 2020 at a purchase price or value of R1,000,000.00 or less will not attract any transfer duty. Accordingly, for the present transfer duty exemption rates to apply, the date of sale must be 1st March 2020 or any date thereafter. The date of sale is the date that the last party to the sale agreement signed such agreement confirming acceptance (this is usually the date the seller signed the agreement).
Transfer duty is calculated on the purchase price of the property or the value of the property, whichever is higher. The following table illustrates the current transfer duty rates which are applicable to all persons including companies, close corporations, and trusts:
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 transfer duty is payable on a transaction, it must be paid to SARS within six months from the date of sale. If it is paid more than six months after the date of sale, the buyer is liable for a penalty/interest as charged by SARS in addition to the unpaid transfer duty. The Transfer Duty Act No. 40 of 1949 makes provision for a few additional transactions which are exempt from the payment of transfer duty including the acquisition of property by inheritance or a transaction that is subject to value added tax (VAT).
Irrespective of whether transfer duty is payable to SARS or not, the buyer is still liable for the attorney’s transfer costs to attend to the registration of the transfer and mortgage bond registration costs, if a mortgage bond is to be registered simultaneously with the transfer. These costs are tariff-based as prescribed by the relevant Legal Practice Council (previously known as the Law Society). The tariff guideline is a sliding scale tariff in accordance with the purchase price.
In addition, the buyer is responsible for the respective attorney’s disbursements, namely, postage & petties, electronic document generation fees, lodging agents’ fees, deeds office registration fees, rates clearance costs etc. If the property is a sectional title, there will be additional costs incurred for an ordinary levy clearance and homeowner’s association levies, if there is a homeowner’s association). These disbursement charges vary between firms in accordance with their respective practices and procedures. Usually the attorneys will provide the buyer with a breakdown of their costs at the inception of a transaction in the form of a proforma account.
When a buyer is making an offer on a property, he/she must carefully consider the transfer duty and transfer costs applicable to the purchase of such property, over and above the purchase price.
- Exemption from transfer duty – Budget Speech 2020
- Drafting of sale of share agreements – Important considerations
- Knowing the hidden costs of buying a property
- Is there a duty on conveyancers to tell purchasers about seller’s historical debt?
- Title Deeds – Amendment of Regulations to Deeds Registries Act