It is sensible to become informed regarding the current legislation involving transfer duties. At Homefair, our recommendation is that you contact a professional property finance consultant when deciding to buy property.
Transfer Duty Threshold
The Ministry of Finance announced that as from March 2015, the rates for transfer duties on the acquisition and sale of property have been modified. This legislation favours middle-income households, as people buying property with a value of less than R750 000 are now exempt from paying transfer duties.
Transfer duty is a government tax charged for transferring the property from the Seller’s name to the Buyer’s name. Compared with the previous threshold set at R600 000, this new limit is of interest to first time property Buyers. The new guidelines regarding transfer duties on property are as follows:
- For property valued between R750 001 – R1 250 000, the rate is 3% on the value above R750 000;
- For property valued between R1 250 001 – R1 750 000, the rate is R15 000 + 6% of the value above R1 250 000;
- For property valued between R1 750 001 – R2 250 000, the rate is R45 000 + 8% of the value above R1 750 000;
- For property valued between R2 250 001 and above, the rate is R85 000 + 11% of the value above R1 250 000
No Transfer Duty
One way to avoid paying transfer duties is to buy a new property that has not been previously registered, or to buy off plan from a Developer. This makes new developments even more attractive to first time Buyers.
Don’t Forget VAT
It is our experience that first time Buyers can become confused regarding transfer duty and VAT. We have already established that transfer duty is a tax paid by the Buyer of property. Value-added tax, or VAT, is a governmental tax charged for a purchase. However, VAT and Transfer Duty are mutually exclusive!
VAT is a sales tax added to the price of a purchase, which is paid by the end consumer but only if the seller has registered as a VAT vendor.
You as a Buyer of property, pay this tax on house purchase – but individuals selling their property do not have to include VAT. South African law states that VAT must be included in the purchase price, unless the sales contract explicitly states otherwise. Setting the price with VAT included also protects the Seller since he has to pay the 14% VAT to the South African Revenue Service (SARS) if registered as a VAT vendor.
Contact Homefair for more information regarding keeping your property investments in safe hands.