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Additional Costs Involved In Purchasing A Property

Purchasers should be aware of various additional costs, over and above the purchase price, which are outlined below.


Transfer costs

Transfer Duty

What's New?

  • 24 February 2016 - Change in Transfer Duty rates announced in the Budget Speech
    New rates were announced in this year’s budget speech on 24 February 2016  and came into effect on 1 March 2016 (see also Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2015  Act No. 13 of 2015 published in GG 39421 on 17 November 2015).

What is it?

Transfer Duty is a tax levied on the value of any property acquired by any person by way of a transaction or in any other way. For the purpose of Transfer Duty, property means land and fixtures and includes real rights in land, rights to minerals, a share or interest in a “residential property company” or a share in a share-block company. All Conveyancers are requested to register with SARS.

These are the Transfer Duty rates applied to properties acquired on or after 1 March 2016, and apply to all persons (including Companies, Close Corporations and Trusts):

 
  ​VALUE OF PROPERTY               
(Rand)         
 
RATE
 0 - 750 000  0%
750 001 - 1 250 000 ​ 3% on the value above 750 000
1 250 001 - 1 750 000 ​ 15 000 + 6% of the value above 1 250 000
1 750 001 - 2 250 000 ​ 45 000 + 8% of the amount above 1 750 000
​2 250 001 - 10 000 000 ​85 000 + 11% of the amount above 2 250 000
​10 000 001 and above ​937 500 +13% of the value exceeding R10 000 000
Top Tip: Make sure that you are using the correct rate, depending when the property was acquired.
 

Who pays Transfer Duty?

  • For acquisitions:
    The person acquiring the property
     
  • For renunciations:
    The person in whose favour or for whose benefit, any interest in or restriction upon the use or disposal of property has been renounced.
  • Should supporting documents be required, it will be requested of the Conveyancer to upload such electronically. Once satisfied, the application will be approved. If no payment is required, the system will automatically release the receipt after approval.
  • Should a payment be required, the Conveyancer will make such electronically after which the receipt will be issued.
  • It is advised that all parties ensure their tax affairs are in order as property transfers are used in an attempt to ensure tax compliance across all taxes. If, for example, you are not registered or you have outstanding tax returns or payments, you will be given the opportunity to correct matters with SARS. Should matters not be resolved, steps will be taken to ensure compliance and this may delay the transfer of the property. One such step that may be taken is the appointment of the Conveyancer or any other person as an agent with the instruction to pay SARS from the proceeds of the sale. It is further recommended that you ensure that your personal details (ID number, Income Tax/VAT number) on our systems are correct as any disparity could also cause delays.
  • A taxable supply is a supply on which VAT must be charged at the standard rate (currently 14%) or at the zero rate. To be a taxable supply, the supplier (seller or transferor) must be a “vendor” and the supply of the property must be in the course or furtherance of an “enterprise.”
  • The supply of an entire enterprise with all its assets (including any fixed property) as a “going concern” may qualify as a zero-rated taxable supply if all the conditions in section 11(1)(e) of the VAT Act are met. Refer to Interpretation Note 57: Sale of an enterprise or part thereof as a going concern and VAT News 15 - August 2000 for more details in this regard.

When should it be paid?

Duty is payable within six (6) months from the date of acquisition. If the Transfer Duty is not paid within this period, interest calculated at 10% per annum for each completed month. A completed month is calculated as the first day from the expiry of the interest free 6 month period to the date of payment.
 
Interest will be charged at the “prescribed rate”. However, these specific provisions did not come into effect from
1 October 2012 when the Tax Administration Act became effective, but will come into effect way of Presidential Proclamation in the Government Gazette at a later date.
 
Remember that in the case of conditional sales the period of 6 months commences from the date on which the transaction was entered into (i.e. the last date of party signature to the agreement), and not the date when the contract becomes binding upon the parties (i.e. the date the conditions are fulfilled.)

How should it be paid?

From 1 April 2011 all Transfer Duty must be paid electronically via eFiling. This will normally be done by a Conveyancer, who acts on your behalf. See the video guide to Transfer Duty and eFiling below.


VAT

A rate of 14% VAT (2011) is payable on purchases directly from developers or vendors registered for VAT, provided such property transactions are part of the sellers’ business activities. (Purchasers will pay either VAT or transfer duty, not both)

Conveyancing fees

The transferring attorney will charge the mandated legal fee to transfer the property.

Deeds Office levy

The transferring attorney will charge the mandated legal fee to transfer the property.


Municipal Rates

Rates due to the local authority has to be paid in full for the financial year. The seller is liable for rates for the part of the year during which they occupy the property, the buyer is responsible for the remainder.

Rates Clearance Certificate

The buyer will also be charged for a municipal rates clearance certificate which is about R30.00 but may vary from region to region.

Body Corporate - Levy clearance

Purchasers of sectional title units have to get a clearance certificate from the body corporate confirming that the seller is up to date with levies. The fee for this amounts to approx. R250. This fee is charged according to the contract and must be paid for by the party stipulated.


Bond Registration Costs

Additional costs apply for purchases financed through a mortgage bond.

Bank Charges

Interim Interest
When the bond is registered, the bank releases the loan amount and charges interest from that day until the day on which the first installment is due. This amount can be added to the loan amount or may be settled immediately after the loan amount is released.

Bond Initiation Fee
Banks may charge a once of fee ranging from R200 to R1 250 to cover administration costs.

Administration Fee
Banks normally charge a monthly admin fee of approx. R26.00 on bonds over R500 000, reflected on statements as a separate item.

Valuation Fee
Commonly known as an inspection or assessment fee to cover the costs of a bank-appointed property assessor who determines whether the property has sufficient value in relation to the loan amount applied for. The fee is between R2 000 and R5 000.

Sectional Title Insurance Certificate
Banks may require a certificate showing that the unit you are purchasing is covered by a valid insurance policy. The policy is issued to the body corporate. Insurance companies charge in the region of R150 to issue a sectional title insurance certificate.

Home Owner’s Insurance
This cover relates to the structure of the property, and covers fire, water damage and other unforeseen events. Banks normally insist on homeowners’ insurance before loans are approved. This premium is normally included in the monthly levies of sectional title properties.

Life Insurance (Bond Cover)
Banks may insist on adequate life insurance to cover the value of the home loan in the event of the owner’s death. The bank may provide this service or you may apply for this from a preferred provider.


These estimates and examples are given for information purposes only and should not be depended on for any specific transaction. Attorney fees are based on recommended tariffs from the Law Society and may vary. Duties and fees may change from time to time. Professional advice should be sought in all instances for individual transactions.

E & OE