In his Budget Speech on 15 February 2006, the Minister of Finance announced that new transfer duty rates as set out below will apply with effect from 1 March 2006.
The threshold at which transfer duty becomes payable has been increased from R190 000 to R500 000. The new graduated rates for natural persons are as follows:
|Value of Property||Rate of Duty|
|R0 to R500 000||0%|
|R500 001 to R1 million||5% of the value above R500 000|
|Over R1 million||R25 000 plus 8% of the value above R1 million|
The flat rate of 10% has been reduced to 8%.
The new rates will apply in respect of property acquired on or after 1 March 2006. The Transfer Duty Act, 40 of 1949, defines "date of acquisition" as follows;
"(a) in the case of the acquisition of property (other than the acquisition of property contemplated in paragraph (b)) by way of a transaction, the date on which the transaction was entered into, irrespective of whether the transaction was conditional or not or was entered into on behalf of a company already registered or still to be registered and, in the case of the acquisition of property otherwise than by way of a transaction, the date upon which the person who so acquired the property became entitled thereto: Provided that where property has been acquired by the exercise of an option to purchase or a right of pre-emption, the date of acquisition shall be the date upon which the option or right of pre-emption was exercised;
(b) in the case of the acquisition of property in terms of item 8 of Schedule 1 to the Share Blocks Control Act, 1980 (Act 59 of 1980), and if section 9 of this Act does not apply to that acquisition, the date of the written request referred to in subitem (1)(b) of the said item 8;"
An ordinary purchase and sale agreement for fixed property is dealt with in paragraph (a), which provides that the date of acquisition in this case is the date that the agreement is entered into, ignoring any conditions that may be contained in the agreement. In other words, it is the date of the last signature of the parties to the agreement. The form of the agreement - whether a standard agreement provided by an estate agent, an agreement drawn up by an attorney, or some other agreement reached by the parties - is not relevant.
As an example, if an offer to purchase a property at a specified price, subject to the purchaser obtaining finance, is made on 8 February 2006 and is accepted by the seller on 10 February 2006, the date of acquisition is 10 February 2006. The fact that finance may only be granted at a later date is not relevant in arriving at the date of acquisition.
SARS is aware that some buyers of fixed property may seek to cancel agreements entered into before 1 March 2006 and enter into new agreements in respect of the same properties to take advantage of the lower transfer duty rates. It should be noted that where a property transaction is cancelled for the purposes of avoiding or evading transfer duty, there is no true cancellation of the agreement and duty will be raised as if the original agreement had not been cancelled. (Secretary for Inland Revenue v Hartzenberg (1966(1) SA 405 (AD)).
ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE