Tax and property transactions
Rayno Botha of SJ Botha Attorneys Inc, located in Boksburg, shares this information, with regard to the taxman's involvement in the purchase of a new home, for anyone looking at purchasing a new property.
Most people are familiar with the term “Transfer Duty”, but what is it exactly, who pays it when and how much?
If transfer duty is payable on all property transfers where the purchase price of the property exceeds the current prescribed R900 000, then why do certain estate agents advertise properties exceeding this amount with the words “No Transfer Duty Payable’?
In each and every property transaction there will either be transfer duty payable, or VAT payable, never both.
What is important to note is that transfer duty is payable by the purchaser and VAT is payable by the seller.
Here is the difference.
Transfer Duty
Transfer duty is a tax levied on the value of any property acquired by any person by way of a transaction or in any other way.
All transactions where the value of the property is less than R900 000 will be exempt from transfer duty.
There are other situations where a property will also be exempted from transfer duties.
These are contained in Section 9 of the Transfer Duty Act, Act 40 of 1949 and a few examples are: property passed to an heir either testate or intestate, property acquired by governed municipalities or water service providers, acquisition of property by a spouse either by divorce or as a result of the death of the spouse, and the transfer from a partnership into the individual partner’s name.
VAT
VAT is an indirect tax on the consumption of goods and services in the economy.
The current VAT rate is 14 per cent and to determine whether VAT or transfer duty will be applicable in a property transaction, one has to take a look at the status of the seller.
If the seller is a registered VAT vendor or for the purchase of the act, then VAT and not transfer duty is due and payable.
Being a registered VAT vendor speaks for itself.
“For the purpose of the act”, means the ordinary course of the business of the seller has to be of such a nature that it involves the buying and/or selling of properties.
Often when a developer develops a new sectional scheme, he being the seller, and registered as a VAT vendor and also his business being of such nature it involves the buying or selling of property, he will be liable for VAT at the current rate of 14 per cent.
