Transfer duty or VAT when purchasing property?
Category Property Investment
When purchasing a property, it is very important to factor in whether VAT is payable or Transfer Duty to SARS.
In order to determine which one is applicable one needs to look at the status of the Seller in the transaction.
VAT
If the Seller is registered for VAT (VAT vendor usually a company) and he sells the property in the cause of his business then VAT will be payable to SARS.
The buyer should always ask whether the Seller is a VAT vendor and check the Offer To Purchase whether the price includes or excludes VAT.
The current rate of VAT is 15%, please note that the buyer will never pay VAT and Transfer Duty together, it will be one or the other and the potential difference should be factored into your costs.
Should it be the Buyer that is in fact a VAT vendor, then normal Transfer Duty will be paid however can then be claimed back from SARS after registration of the property.
TRANSFER DUTY
Where the Seller is not registered for VAT then Transfer Duty will be payable.
The purchaser is responsible for paying Transfer Duty and is payable according to the following, effective 01 March 2015:
| Up to R1 000 000 | 0% |
| R1 000 001 - R1 375 000 | 3% of the value above R1 000 000 |
| R1 375 001 - R1 925 000 | R11 250 + 6% of the value above R1 375 000 |
| R2 475 001 - R11 000 000 | R88 250 + 11% of the value above R2 475 000 |
| R11 000 001 and above | R1 026 000 + 13% of the value above R11 000 000 |
Transfer Duty is payable within 6 months from the date the offer was signed and although Transfer Duty is generally paid on the purchase price, should the market value be a lot higher than the purchase price then it will be levied on the higher amount.
In the event a property is obtained as part of an inheritance or divorce settlement then no Transfer Duty will be paid.
Author: Cesar Alexandre
