What is transfer duty?

posted by Reef Hickley

What is transfer duty?


Transfer duty is an additional cost that needs to be included into your budget planning when purchasing a property. Don’t confuse it with ‘transfer of property’ costs. This is a fee paid to the conveyancing attorney who transfers the property from the seller to the buyer, whereas transfer duty is a mandatory tax paid to SARS on the transfer of property.


Transfer duty is only payable on properties worth more than R1 000 000. If the property is less than that, you will still need to pay the conveyancing attorney for the transfer of property, but there will be no transfer duty tax.


Certain conditions exempt you from transfer duty, such as acquiring a property through marriage in community of property.


When do I pay transfer duty?


Transfer duty is payable within six months of the date of acquisition. If it is not paid within this period, interest is calculated at 10% per annum for each completed month.


How is it calculated?

It is calculated on the selling price or value of the property, whichever is the greater.

Under what conditions will I be exempt?


Property transfers are exempt from transfer duty in these circumstances:


- Marriage in community of property. If someone who owns a property gets married in community of property, his or her spouse will automatically become the owner of a half-share of the property, without paying any transfer duty.


- Divorce. Transfer duty does not apply if a property is awarded to a spouse in terms of a divorce order. The exemption applies to all marital regimes and to civil unions. However, if the property is not awarded to a spouse in terms of a divorce order and the parties reach an agreement outside of the formal divorce proceedings, the spouse who acquires the property will be liable for transfer duty.

- Inheritance. Heirs and beneficiaries are exempt from paying transfer duty on property inherited from a deceased estate, regardless of the nature of their relationship with the deceased and irrespective of whether or not the deceased died without a valid will.


- Cancelled transactions. If a property purchase is cancelled before the transfer is registered at the Deeds Office, there is no liability for transfer duty if SARS is satisfied that the cancellation is legitimate.


Keep in mind that, by law, a transaction cannot be subject to both VAT and transfer duty and, in a property transaction, the payment of VAT always takes precedence over that of transfer duty where the seller is a VAT vendor.


Who will handle my payments?


A conveyancing attorney, responsible for the transfer of the property to your ownership, will handle transfer duty payments on your behalf.


The seller usually appoints the conveyancing attorney but their cost is covered by the purchaser.