SOUTH AFRICAN REVENUE SERVICE
MEDIA RELEASE NUMBER 16 OF 2003

6 OCTOBER 2003

TRANSFER DUTY - RESIDENTIAL PROPERTIES HELD IN DISCRETIONARY TRUSTS

In December 2002 the Transfer Duty Act was amended to put a stop to avoidance schemes involving residential properties held in companies, close corporations and trusts. The Minister of Finance announced in his Budget Speech in February 2003 that further measures would be introduced to prevent the avoidance of transfer duty. Amendments due to go before Parliament later this year will introduce further anti-avoidance measures and a penalty of 200% in cases of evasion, similar to the additional tax provisions for income tax and VAT.

SARS has for some time been investigating the use of discretionary trusts to avoid the payment of transfer duty. This investigation involved examining trust files at the offices of the Master of The High Court to identify trusts where residential property transactions had taken place. During 2002 SARS commenced issuing assessments and to date transactions involving transfer duty and penalties of some R105 million have been identified. While many of the parties involved have paid the assessments, a large number have not responded. SARS is now issuing further assessments and issuing letters of demand for the outstanding duty and penalties.

SARS holds the view that even before the amendment to the Act, transfer duty was payable because -

As from November 2003 SARS will commence legal action to recover the unpaid duty and penalties. Persons wishing to settle their liabilities and avoid legal action should contact the Woodmead Branch of SARS before 31 October 2003.

ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
PRETORIA



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