M3. Property Taxes

  1. Transfer Duty

Transfer Duty will be the most common tax payable on property transactions. It is payable on the purchase price of the property and must be paid within 6 months after the date of sale of the property. Failure to pay the Transfer Duty within the 6 months period leads to penalties being levied on Transfer Duty

  1. Value Added Tax (VAT)

In the case of a sale of Fixed Property, VAT is payable by the seller of the property only if the seller is a VAT vendor and the property is sold in the course of furtherance of the seller’s enterprise. This is irrespective of whether the property forms part of the seller’s trading stock or is a Capital Asset. If both the seller and purchaser are VAT vendors and the property is sold as a going concern, i.e. a Commercial Property with tenants, then the transaction will be considered zero-rated (note: contract must specify the inclusion of VAT)

  1. Capital Gains Tax (CGT)

All immovable property is subject to capital gains tax unless the property is a Primary Residence.

In order to be considered as a primary residence, the following is applicable:

  1. It must be owned by an individual (i.e. Trust, Companies, and Close Corporations are excluded)
  2. The owner of the residence must live in the property and any part of the home used for business purposes does not form part of the Primary Residence and will be included for purposes of Capital Gains Tax

A Primary Residence is subject to Capital Gains Tax in the following circumstances:

  1. If on the sale of the Primary Residence, the Nett Gain is more than R1,5m then that portion that is over R1,5m will be subject to Capital Gains Tax
  2. In the event of any property being larger than 2 hectares, then the area over and above 2 hectares is subject to Capital Gains Tax

Individuals pay Capital Gains Tax at a rate of 25% and Companies, Close Corporations and Trusts at a rate of 50%. (**updated annually and % are subject to increase)

Estimated Capital Gains / Profit and Loss

Selling Price 1 100 000
Original Purchase Price 500 000
Bond Costs 25 000
Transfer costs 30 000
Agent’s commission 50 000
Sales Price Shortfall 100 000
Repairs 45 000
Bond Cancelation 320 000
Net profit/loss 30 000
Profit x 50% 15 000

The R15 000 profit will be added to the total income of the individual/legal entity at the end of that financial year and the taxes are then worked out accordingly.

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