What is transfer duty in South Africa?

Question

MyProperty · Accepted Answer

Whenever you buy a house valued at over R1 100 00 (as of 1st March 2023) fees are payable to the South African Revenue Service (SARS).

Transfer duty is a tax imposed on the value of any property acquisition, regardless of how it is obtained. This tax is payable to SARS and is based on the value of the property being transferred. It should not be confused with property transfer costs, which are fees paid to a conveyancing attorney handling the transfer of property from the seller to the buyer.

The rate of transfer duty is applicable to properties valued at more than R1.1 million, and it is only levied on the amount exceeding R1.1 million for such properties. The tax must be paid within six months from the date of property acquisition, and any failure to make timely payments may result in penalties. SARS issues annual transfer duty tables that specify the amounts due based on different property values.

Transfer duty - cost breakdown

2024 (1 March 2023 – 29 February 2024):

R1 – R1,100,000 = 0%
R1,100,001 – R1,512,500=3% of the value above R1,100,000
R1,512,501 – R2,117,500=R12,375 + 6% of the value above R 1,512,500
R2,117,501 – R2,722,500=R48,675 + 8% of the value above R 2,117,500
R2,722,501 – R12,100,000=R97,075 +11% of the value above R2,722,500
R12,100,001 and above=R1,128,600 + 13% of the value exceeding R12,100,000

Certain exemptions from transfer duty exist, including:

• Marriage in community of property: When a property owner gets married in community of property, their spouse automatically becomes a half-share owner of the property without incurring transfer duty.

• Divorce: Transfer duty is not applicable when a property is awarded to a spouse as part of a divorce settlement, covering all marital regimes and civil unions. However, if the property is acquired outside of formal divorce proceedings, transfer duty and conveyancing attorney costs may apply.

• Inheritance: Beneficiaries and heirs are exempt from paying transfer duty on properties inherited from a deceased estate, regardless of their relationship with the deceased or whether a valid will exists. However, they still need to cover the conveyancing attorney's costs for property transfer.

• Cancelled transactions: If a property purchase is canceled before the transfer is registered at the deeds office and SARS is satisfied that the cancellation is legitimate, no transfer duty is levied.

In some cases, when purchasing property from developers, Value Added Tax (VAT) may apply instead of transfer duty. Buyers should check if the sellers are registered for VAT, as VAT takes precedence over transfer duty in property transactions. It's essential for property buyers to budget for transfer duty and property transfer fees to avoid any financial surprises when acquiring a home.