The transfer costs when buying a home

In South Africa the transfer costs when buying a home is known as a transfer duty. This transfer duty is levied by the Government on all property transactions and is paid when you purchase property and the title transferred in your name. The transfer duty is paid on both the land and the home. It’s the value of both land and home that is used to determine how much of a transfer duty you will have to pay. Therefore, the higher the value of the land and home, the larger transfer duty amount you will have to pay.

The Government uses a sliding scale system to determine the amount of the transfer duty. The scale is slightly different for individuals than for corporations. The sliding scale for individuals is:

For under R 500,000.00 the transfer duty is zero percent.

From R 500,001.00 to 1 million, the transfer duty is 5%.

Anything above R 1,000,001.00 equals R 25,000.00 plus an 8% transfer duty.

An example of the sliding scale transfer duty is such that if your bond is for 1.2 million, you will pay nothing on the first R 500,000.00, on the second R 500,000.00 (to 1,000,000) you will pay a 5% transfer duty (or a total of R 25,000.00 on the first million) and 8% on the remaining R 200,000.00.

The transfer duty when you buy property in the name of a corporation, trust or company is higher than with individual buyers. There is a 10% transfer duty levied on such purchases.

The laws are different if the developer selling the home is registered for Value-Added Tax (VAT). The VAT is a type of indirect tax based on the consumption of goods and services in the economy. The government raises revenue by requiring certain vendors or traders to register and charge VAT on taxable supplies of services and goods. The nature of the VAT is that it is destination based, meaning the tax is only charged on goods and services consumed in South Africa.

The transfer duty is payable on the date of acquisition. Signifying that it is due on the date the transaction was entered into. It is when both parties, the buyer and the seller, enter into contract to transfer the title of the property.

The transfer duty is payable within six months of the date of acquisition of the property. In certain situations, the transfer duty needs to be paid by persons other than those that acquired the property and sometimes both parties may be held liable.

The liability for the transfer duty begins on the date that the contract to transfer title was entered by both parties, regardless of any suspensive conditions. An example of a suspensive condition is when a buyer and seller enter into a contract on 1 March, with the stipulation that the purchaser of the home secure a loan within three months from the date of the contract (1 March). Regardless of when the purchaser obtains the loan, the transfer duty will be payable 1; six months after 1 March.