The Implication of VAT and transfer duty on transfers

ON THE SALE OF IMMOVABLE PROPERTY ONE OF TWO TAXES WILL BE PAYABLE EITHER VAT OR TRANSFER DUTY BUT NOT BOTH AT THE SAME TIME. IT WILL BE ONE OR THE OTHER AND TRANSFER DUTY ONLY APPLIES TO TRANSACTIONS EXCEEDING R900 000 IN VALUE.

Where the seller of immovable property is a registered VAT vendor then VAT must be levied on the price of the property, unless exempted by one of the provisions of the VAT Act. When VAT is payable on a transaction, transfer duty does not and will not apply.

It is therefore very important that should the Seller be a VAT vendor the sale Agreement stipulates this and that the Buyer is made aware of same before he/s

he signs the contract. The buyer does not want to be told later that he has to pay 14% VAT over and above the purchase price if he did not budget for same.

Where the Seller is not a registered VAT vendor transfer duty will be payable. Where the purchaser is a VAT vendor and the seller is not, then the purchaser can claim the transfer duty subject to the property being used to generate taxable supplies. If both parties are VAT vendors, the purchaser may claim the vat charged by the seller, from SARS, likewise if both parties are non VAT vendors the transaction only attracts transfer duty.

The following transactions are exempted from Transfer duty:

1. Where a spouse has been awarded a property in terms of a divorce order, or; 2. Where a property is transferred to a surviving spouse as a result of the death of

his/her spouse; 3. Or where an immovable property is bequeathed to an heir in terms of a Will.