The new transfer duty rate structure announced in the Budget 2011 will apply to property sold in terms of purchase agreements concluded on or after 23 February 2011.
The new transfer duty rate structure will apply to property sold in terms of purchase agreements concluded on or after 23 February 2011.
The increase in the exempt threshold for transfer duty from R500 000 to R600 000 and other favourable reductions in the calculations in transfer duty announced in the Budget will be welcome news to the property industry.
So says David Warmback from Shepstone & Wylie Attorneys commercial department who adds that this is particularly so for those in the residential market which has been quite depressed since 2008.
“From 23 February 2011 no transfer duty will be paid on properties with a value below R600 000,” says Warmback.
This was the first time since the 2006 Budget that transfer duty rates on property have been adjusted.
“For property values above R600 001, the rate of transfer duty will be reduced from 5% up to R1 million to 3% up to R1 million.
“For properties costing more than R1 million the rate is R12 000 plus 5% on the value between R1 million and R1.5 million. For properties over R1,5 million the duty will be R37 000 plus 8% above that figure,” says Warmback.
Transfer duty on acquisitions of properties by persons other than natural persons, says Warmback, was 8% of the value of the property but it has been announced that the revised structure will also apply to close corporations, companies and trusts.
“This will no doubt come as a surprise to the commercial and industrial property sector, although many of those transactions are subject to VAT, where transfer duty is not applicable.”
Warmback says transfer duty on a property costing R1 million was R25 000 and this will in future be reduced to R12 000 with the introduction of the new structure.
“A purchaser purchasing property for R1.8 million was paying R89 000 in duty but will now only pay R61 000, a substantial saving.”
“Estate agents will no doubt be delighted as this should definitely give the property market a lift,” says Warmback.
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