Following the budget speech by the Minister of Finance, as of 1 April 2025, no transfer duty is to be paid on immovable property transactions that fall below the threshold of R1.2 million. This threshold is reviewed annually by the South African Revenue Services (SARS). The transfer duty rates that are generally to be paid are determined by the value of the property, starting with a 3% rate for a property that is valued between R1.2 million and R1.6 million, and increasing gradually as the property values increase, ending at a rate of 13% for properties valued above R13 300 000,00.
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Herold Gie Attorneys candidate Attorney Mieke Wiehman and Director Martin Vermeulen explains, the imposition of transfer duty, in terms of section 2 of the Transfer Duty Act 40/1949 (TDA), is a compulsory cost component in all immovable property transactions. However, in terms of section 9 of the TDA, there are various specific legal exemptions to this obligation – some of these grounds applicable to natural persons (individuals) will be explored in this article.
Transfer duty
Transfer duty is essentially a tax that is levied upon the acquisition of immovable property. The purchaser of the property is liable for such payment to be made to SARS. This shall be done before the transfer is lodged with the deeds office to be registered in the name of the purchaser. The amount to be paid shall be calculated based on the value of the property. Such a calculation is made in accordance with the SARS sliding scale that is applicable at the time of the transfer.
Transfer duty must be distinguished from transfer costs, which include legal and administrative fees for handling the transfer of the property. Transfer costs are also paid for by the purchaser, however such payment is for the benefit of the transferring attorney (conveyancer). These costs include conveyancing fees, based on the tariffs recommended by the Legal Practice Council, deeds office fees and possibly bank charges where there is a mortgage bond over the property. Transfer costs are to be paid at the start of the transfer process once the Offer to Purchase (OTP) has been signed and the conveyancer has been appointed, whereas transfer duty is payable right before the transfer is lodged. Note that an exemption from having to pay transfer duty (to SARS) does not mean that the purchaser is not liable for payment of transfer costs (to the conveyancer).
Upon the acquisition of a property that is valued above R1.2 million, transfer duty shall be payable, unless circumstances apply where one would be exempted from such an obligation. The date of acquisition generally constitutes the day on which the OTP is signed by both the seller and the purchaser. In terms of the TDA, payment must be made within six months from that date, otherwise penalties (interest) shall be imposed by SARS for late payment. The payment is usually made by the conveyancer, on behalf of the purchaser, after which the conveyancer should obtain a transfer duty receipt from SARS before lodgment with the deeds office. The payment of transfer duty is therefore imperative, since the deeds office shall not process and register the transfer of the property into the name of the purchaser without the SARS receipt.
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Legal exemptions to paying transfer duty
Even though the parties to the transaction are generally not required to submit a special application for these exemptions to apply, the conveyancer shall still be required to submit a declaration to SARS which enables them to obtain a transfer duty exemption receipt when the circumstances listed below apply to the transaction. Such a certificate is similar to the transfer duty receipt required by the deeds office. These receipts serve as proof to the deeds office that the transaction has been assessed by SARS for the payment of transfer duty or, alternatively, that the parties have been lawfully exempted from such payment.
Under sections 2 and 9 of the TDA, the legal exemptions to paying transfer duty that most commonly apply to parties who are natural persons shall be discussed below.
Sale of property below the threshold – section 2
Firstly, as per the budget speech in April 2025, property transactions that fall below the recently updated threshold of R1.2 million would allow purchasers to be exempted from having to pay transfer duty. This specific exemption applies across the board to both natural persons and juristic persons, such as companies, close corporations and trusts. The value of the property for this purpose is based on the purchase price or the market value of the property, whichever is higher. SARS might have the discretion to annually vary this threshold, but the exemption itself shall remain as a statutory exemption in terms of section 2 of the TDA which cannot be discretionally disregarded.
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Transfer of the property of a partnership to the individual partners personally – section 9(3)
Where property is being transferred amongst partners upon the dissolution or the termination of that partnership agreement, no transfer duty shall be payable. Consideration must be given to the fact that a business partnership, unlike companies or close corporations, is not a separate legal entity operating with independent legal personality. Even though this type of relationship is made up of an association of two or more partners, the individual partners still accept personal liability and responsibility for the debts and obligations of the partnership. There must be a valid partnership. The partnership must have acquired the property during its existence. It is important to note that this exemption applies only to the receipt of each partner’s proportional interest in the partnership. Transfer duty will thus have to be paid on any excess portion received upon the dissolution or termination of the partnership.
Property inherited through a deceased estate – section 9(1)(e)
Furthermore, no transfer duty will be payable where an heir or legatee inherits property from a deceased estate, regardless of whether the inheritance is in terms of a will or intestate succession. The difference between an heir and a legatee is merely the fact that heirs are entitled to an inheritance in terms of intestate succession, whereas legatees are persons that are expressly named in the will of the deceased to receive a specific share or item in the deceased’s estate. The exemption only applies to the original transfer directly from the deceased estate to that of the beneficiary. This exemption therefore falls away once the property is thereafter sold by the beneficiary and transferred to a third party. If property from the deceased’s estate is purchased at a market-related price by a beneficiary when that property was not expressly bequeathed to them, the transfer shall be deemed to be a sale, not an inheritance. Such a transfer shall therefore not fall within the ambit of this exemption. One must again note that this exemption only applies to natural persons. Therefore, even where a company or a trust is a beneficiary, they would not qualify for this exemption.
Property awarded in a divorce settlement – section 9(1)(i)
Transfer duty shall be exempted where property is transferred between former spouses upon the dissolution of their marriage, which is done in terms of a divorce order, regardless of whether it is awarded through settlement or a court order. The divorce order may incorporate a settlement agreement regarding the division of assets amongst the spouses. SARS would require a copy of the divorce order to recognise the exemption. For the exemption to apply, the transfer may only take place between the parties to the marriage or union, i.e. the ex-spouses, regardless of the applicable marital regime.
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Property transferred between spouses during the marriage – section 9(1)(k)
Where spouses are married in community of property, by operation of law the one spouse becomes entitled to an undivided half share of the property that the other spouse owned prior to entering into the marriage. This is due to the fact that a marriage in community of property causes all assets and liabilities to be shared equally between the spouses. Any such acquisitions or changes in ownership to be affected in the deeds registry is therefore exempt from the payment of transfer duty.
Sale of property subject to VAT – section 9(15)
An important additional exemption that often applies, regardless of whether the parties are natural persons or not, is to transactions where VAT is payable. This exemption intends to avoid double taxation; either VAT or transfer duty is payable, not both. Transfer duty need not be paid where the seller is a VAT vendor or where the sale itself is subject to the payment of VAT. This exemption applies regardless of the purchase price or value of the property. Instead of having to pay the transfer duty, VAT would be payable on the transaction, either at the standard rate of 15%, or at zero rate where the property is sold as a going concern.
Under section 9 of the TDA there are further additional grounds that allow for exemptions. However, the aforementioned grounds are specifically important for natural persons to be aware of.
The process of claiming an exemption with SARS
It is imperative that parties be able to determine which grounds for exemption apply to the circumstances. The conveyancer will have to provide proof of the exemption ground for SARS to be able to issue the transfer duty exemption receipt, for example proof of a deceased estate or a divorce order. Application for the exemption must be made to SARS via their eFiling system. This application would require the conveyancer to complete a transfer duty declaration form, to be filled in electronically and to be accompanied by all the supporting documentation. After reviewing the submission, SARS shall then issue the transfer duty exemption receipt confirming that no transfer duty is payable. As a final step in the process, the transfer duty exemption receipt will have to be lodged at the deeds office in order to complete the registration of transfer of the property to the purchaser/transferee.
When acquiring immovable property in South Africa, the distinction between transfer duty and transfer costs is important to note. Parties must ensure that they confirm and understand the market value and the type of transaction they are dealing with. When it comes to transfer duty, the exemption from the obligation to pay this statutory tax can reduce the financial burden on purchasers considerably. Exemptions essentially provide much needed tax relief, and it eases the financial strain that generally accompanies large property transfers. It is therefore helpful for prospective purchasers to be well-informed of exemption grounds that exist in their favour, including the accompanying procedural requirements to ensure that unnecessary delays or penalties are avoided.
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