In terms of the Transfer Duty Act 40 of 1949, when a purchaser transfers property ( land, shares, members’ interest into his/her name, he/she will be liable to pay transfer duty. It is payable within 6 months of date of contract, failing which, interest at 10% per annum on each completed month will be charged until the duty is paid. SARS calculates the duty payable, on a sliding scale:
|VALUE OF PROPERTY
|0 – R900 000||0%|
|R900 001 – R1250 000||3% of the value above R900 000|
|R1250 001 – R1750 000||R10 500 + 6% of the value above R1250 000|
|R1750 001 – R2250 000||R40 500 + 8% of the value above R1750 000|
|R2250 001 – R10 000 000||R80 500 + 11% of the value above R2250 000|
|R10 000 001 and above||R933 000 + 13% of the value above R10 000 000|
- VALUED ADDED TAX:
In the event that the seller is registered for VAT (ie VAT vendor), the purchaser will not pay transfer duty, but instead VAT will be levied on the purchase price, at 14% (usually included in the purchase price). The seller will be responsible to pay the VAT to SARS. Should the purchaser also be registered for VAT, then the VAT payable could be levied at 0%, in the event that the asset (property) is sold as a going concern.
NO TRANSFER DUTY IS PAYABLE WHERE VAT IS PAYABLE, AND VICE VERSA
- WITHHOLDING TAX
The buyer of immovable property must withhold a certain percentage of the purchase price if it exceeds R2 million, in the event that the seller is a non-resident in South Africa:
- 7.5% where the seller is a natural person
- 10% where the seller is a company; and
- 15% where the seller is a trust.
The transferring attorney will withhold this tax on behalf of the purchaser and pay it over to SARS. This withholding tax is not a final tax but an advance payment of tax on the seller’s actual account of normal tax liability.
- CAPITAL GAINS TAX (CGT)
This is tax payable on profit made on the sale (disposal) of a capital asset, assessed and levied differently from tax on profit (income tax) realized from sale of goods or services in the normal course of a business.
The table below sets out the annual exclusion.
|Person||Annual exclusion for a year
|2017 and 2018
|2013 to 2016
||2010 and 2011
||2006 and earlier years
|Natural person||40 000||30 000||20 000||17 500||16 000||15 000||12 500||10 000|
|Natural person – in year of death||300 000||300 000||200 000||120 000||120 000||120 000||60 000||50 000|
|Special trust for a person with a disability||40 000||30 000||20 000||17 500||16 000||15 000||12 500||10 000|
|Deceased estate||40 000||30 000||20 000||17 500||16 000||15 000||12 500||10 000|
|Insolvent estate||40 000||30 000||20 000||17 500||16 000||15 000||12 500||10 000|
4.1 Primary residence exclusion
The first R2 million of any capital gain or loss on the sale of primary residence is excluded from CGT. A home will not constitute a primary residence unless:
- It is owned by a natural person ( not a trust, company or close corporation); and
- The owner or spouse of the owner must ordinarily reside in the home as his/her main residence and must use the home mainly for domestic purposes.
If the capital gain on the sale of the primary residence exceeds R2million, the portion that exceeds R2 million, will be subject to CGT.
The exclusion will also not apply to the portion of a capital gain that relates to any part of the residence that is used for the purpose of trade, for example, if you use your study as an office for business purposes or if you let the residence. However, there are certain exemptions to these.
In the event that the primary residence is held jointly by spouses, the R2 million exclusion is divided equally between them. That is, each will qualify for an exclusion of R1 million but each will still be entitled to the R40 000 exclusion.
4.2 Indicated below are the current percentages by which CGT is calculated
- 18% for individuals and specified trusts
- 22.4% for companies
- 36% for non-specified trusts
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)