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  • Writer's pictureLawtons Africa

When is transfer duty or VAT payable on the sale of immovable property?

Author: Kobus de Beer


When immovable property is sold, transfer duty or Value Added Tax (VAT) is always applicable to the transaction. Only one applies to a property transaction. Determining which one is not that simple.



The sale of “goods”, in general terms, attracts an indirect tax called VAT. The term “goods” includes fixed property, and it’s important to establish who is selling the fixed property. Is the seller a VAT vendor and, if so, is the seller a VAT vendor in terms of the transaction under consideration? In simple terms, was the property sold as part of the business of the seller? Then the provisions are more complex. If it is a sale that attracts VAT, SARS will demand VAT from the seller, not the purchaser. When selling a property, the question of whether transfer duty or VAT is payable is an important consideration and can have serious implications for the seller or their representative.


In addition, some property transactions are VAT-exempt. This means that no VAT is charged. VAT property transactions can also be zero-rated. That is not the same as VAT-exempt. When a transaction is zero-rated, the VAT rate is 0%. This will typically be for the sale of a going concern that involves immovable property. There are strict, prescribed criteria for zero-rated transactions.


If the transaction is exempt from VAT or the seller is not a VAT vendor for the purpose of the current transaction, then transfer duty is payable. It’s important to note that certain transactions are exempt from transfer duty. Transfer duty is payable on a sliding scale, and the annual budget speech by the Minister of Finance can change that scale.


If you find yourself in a position of uncertainty, we at Lawtons Africa can help you to navigate through property complexities.

 

Lawtons Africa is a South African law firm. With roots that grew out of seeds sown in down-town Johannesburg in 1892, our history features various changes and different names. Our team of lawyers, including directors, consultants, associates and candidate attorneys is highly qualified, market-recognised and skilled. For further information, visit www.lawtonsafrica.com

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