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What is donations tax on property?

21 Sep 2009
Donations tax becomes applicable when the donor donates an immovable property to a donee.

So says Sifiso Msomi from Shepstone & Wylie Attorneys, who adds that a natural person may make donations of up to R100k a year without attracting donations tax.

Donations tax will be calculated at 20% on the market value of the property.

The R100k as mentioned above will be taken into account when doing this calculation.

Where any property is disposed of for a consideration, which, in the opinion of SARS, is not an adequate consideration, it is deemed to have been disposed of under a donation to the extent of the inadequacy.

"This normally arises when parties, particularly relatives, conclude a 'sale' which in effect is a donation," adds Msomi.

For example, a father "sells" to his son an immovable property valued at R1,5m for R500k, which is clearly well below the market value. SARS will insist on two valuation reports in respect of the property and will see the transactions for what it really is – a donation and not a sale.

Donations tax and transfer duty will be payable.

"It is also important to note that it is the donor who pays the donations tax," concludes Msomi.

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