Let’s Chat Transfer Duty

Let’s Chat Transfer Duty

Has the term ‘transfer duty’ ever come up in conversation and you have not quite understood what it means and how it applies to the process of buying property? We sum up what transfer duty is, who pays it and how to calculate the amount.

A transfer duty is tax payable by a buyer and is in addition to the purchase price of the property. Transfer duties are calculated according to the fair market value of the property and not necessarily on the purchase price, however more often than not, the purchase price is deemed as the fair market value of the property.

Transfer duty should not be confused with the term ‘transfer cost’ as the transfer cost is an amount that has to be paid to the transferring attorney, such as Louw & Coetzee Attorneys, to cover the costs of registering the transfer of ownership of the property you are purchasing at the Deeds Office.

Interestingly enough, there are exemptions to paying transfer duties!

  • Since March 2020, you are exempt from paying transfer duty on any property purchased for or valued below R1 000 000.
  • If you marry in-community-of-property your spouse will automatically become co-owner of your property without having to pay any transfer duties, and the same goes for any property they own.
  • In the case of a divorce where property is awarded to a spouse with regards to a divorce order, no transfer duty needs to be paid.
  • If you inherit a property as a beneficiary or heir you are exempt from paying a transfer duty on a property that is inherited from a deceased estate.
  • If the purchase of the property is cancelled before registration takes place at the Deeds Office, you are not liable for paying the transfer duty. SARS will need to confirm if the cancellation was lawful or just.

When it comes to buying a new development, one can note that Real Estate Groups and Agents boast ‘No Transfer Duty’ and ‘VAT included’ in the selling price. Why? Transactions, by law, cannot be subject to both VAT and transfer duty payments. VAT payments always take preference over the payment of transfer duty if the seller is a VAT vendor.

Below is the rate of Transfer Duty payable on a property, extracted from sars.gov.za for 1 March 2022 – 28 February 2023:

Value of the property (R)​​ ​Rate
1 – 1 000 000  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 R1 375 000
1 925 001 – 2 475 000 R44 250 + 8% of the value above R1 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