SARS and Transfer Duty Fees
When purchasing and transferring a newly acquired property, there are some extra costs involved in the process. These extra costs include Transfer Duty Fees, paid to the South African Revenue Services (SARS), as well as all services completed by your appointed Conveyancer Attorney.
In this article, we will discuss the difference between Transfer Duty Fees and Conveyancing fees, how one calculates one’s Transfer Duty Fees and which information SARS needs to complete the property transfer.
What is the difference between Transfer Duty Fees and Conveyancing fees?
Although these two fees are both seen as extra costs in the process of transferring and/or purchasing property, the buyer needs to cover both of them.
Firstly, let’s discuss Conveyancing fees. When purchasing property, the buyer appoints a Conveyancing Attorney. They are in charge of all the legal processes of transferring the property from the seller to the buyer’s name. Thus, the costs acquired by the Conveyancing Attorney is the responsibility of the buyer. This will cover all the services completed by the Conveyancing Attorney, as well as the Transfer Duty Fees owed to SARS.
Your Conveyancing Attorney will pay the Transfer Duty Fees on the buyer’s behalf. When a buyer acquires their home, he or she becomes liable for the Transfer Duty Fees. This Transfer duty is the tax that is payable to SARS and is statutory and non-negotiable.
How are transfer duties calculated?
The value of the property, not the price, dictates the transfer duty fees. SARS will generally regard the purchase price of the property to be its value. However, if SARS believes that the purchase price does not correspond with the true value, they calculate the transfer duty on the true or fair value.
The threshold has recently been raised. Originally, any property with a value up to R900 000 was exempt from transfer duties. This amount has been increased from R900 000 to R1 000 000 in March 2020.
Below are the transfer duty rates applicable on property purchased on or after 1 March 2020.
Value of property (R): Rate
R0 – R1000 000: No transfer duty
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
R1 925 001 – R2 475 000: R44 250 + 8% of the value above R1 925 000
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
What information does SARS need to complete the transfer?
Because of the new transfer duty system and rates, SARS effectively will only issue the relevant transfer duty receipt on condition that all parties concerned are not only registered but that all their tax returns and taxes are up to date.
In essence, SARS will use all property transactions in South Africa to monitor everyone’s tax status, not only in relation to the property purchased or sold but in relation to their tax status in general.
As such, the following information is now required from all parties concerned:
- VAT registration numbers of both Purchaser or Seller
- Details of directors, shareholders, members, etc (if either party is a legal entity)
- The original purchase price paid by the Seller and the actual date of acquisition of the property
- Method of payment of the purchase price by the Purchaser i.e. details of bond grant and institution granting bond
- Income Tax numbers of both Seller and Purchaser
- VAT registration number of estate agency (if applicable)
Because of the new transfer duty system, the process of obtaining a transfer duty receipt from SARS in order to complete the property transfer process now takes a little bit longer. This will place an additional burden on Conveyancing Attorneys and could delay the transfer.
Once the transfer of property process has begun, the buyer and seller need to be made aware that there are extra costs involved in the process:
- Conveyancing fees
- Transfer Duty Fees
The difference between the mentioned fees is:
- Conveyancing fees cover all services completed by your appointed Conveyancing Attorneys.
- The transfer Duty Fee is calculated on the value – not the price – of the property and is paid to SARS by your appointed Conveyancing Attorneys.
These Transfer Duty Fees, and the processes connected, have recently changed. This could delay or prolong obtaining a transfer duty receipt from SARS, which is necessary to complete the property transfer.