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What is Transfer Duty in South Africa?
Transfer duty is a tax levied by the South African Revenue Service (SARS) on the purchase of property. It is payable by the buyer when acquiring immovable property (land and buildings) and is calculated on the higher of the purchase price or the market value of the property. The tax is governed by the Transfer Duty Act 40 of 1949.
Who Pays Transfer Duty?
The buyer is responsible for paying the transfer duty. This applies to individuals, companies, trusts, and other legal entities. The same progressive tax table is used for all buyer types. Importantly, transfer duty is only payable if the transaction is NOT subject to VAT. If the seller is a registered VAT vendor and the sale is part of their business, VAT is charged instead of transfer duty.
How is Transfer Duty Calculated?
Transfer duty is calculated using a progressive marginal rate system. This means different portions of the property value are taxed at increasing rates. The first portion, up to a specific threshold, is exempt from tax. Amounts above this threshold fall into higher tax brackets.
The official SARS rates are as follows:
| Value of Property (ZAR) | Rate on the portion within the bracket |
|---|---|
| 0 – 1,100,000 | 0% |
| 1,100,001 – 1,512,500 | 3% |
| 1,512,501 – 2,117,500 | 6% |
| 2,117,501 – 2,722,500 | 8% |
| 2,722,501 – 12,100,000 | 11% |
| Above 12,100,000 | 13% |
Calculation Example
Let's calculate the transfer duty for a property purchased for ZAR 2,000,000.
- The first ZAR 1,100,000 is exempt (0% duty).
- The next ZAR 412,500 (from 1,100,001 to 1,512,500) is taxed at 3%: ZAR 412,500 * 3% = ZAR 12,375.
- The remaining ZAR 487,500 (from 1,512,501 to 2,000,000) is taxed at 6%: ZAR 487,500 * 6% = ZAR 29,250.
The total transfer duty payable is ZAR 12,375 + ZAR 29,250 = ZAR 41,625.
High-Value Example
For a property worth ZAR 15,000,000:
- 0-1,100,000: 0% = ZAR 0
- 1,100,001-1,512,500: 3% of 412,500 = ZAR 12,375
- 1,512,501-2,117,500: 6% of 605,000 = ZAR 36,300
- 2,117,501-2,722,500: 8% of 605,000 = ZAR 48,400
- 2,722,501-12,100,000: 11% of 9,377,500 = ZAR 1,031,525
- Above 12,100,000: 13% of 2,900,000 = ZAR 377,000
Total duty: ZAR 12,375 + 36,300 + 48,400 + 1,031,525 + 377,000 = ZAR 1,505,600.
Other Costs in a Property Transfer
Transfer duty is just one component of the costs involved in buying property. Other significant costs typically include:
- Conveyancer's Fees: The attorney who handles the transfer charges professional fees, which are usually based on a tariff.
- Deeds Office Registration Fees: A fee paid to the Deeds Office to register the change of ownership.
- Bond Registration Costs: If you are registering a mortgage, there are additional bank and attorney fees.
It is crucial to budget for all these costs, not just the transfer duty.
What Document Should You Prepare?
After estimating your costs, the next step is often to formalize your offer. An Offer to Purchase Agreement is the key legal document that sets out the terms of the property sale between the buyer and seller. It includes the purchase price, deposit details, conditions (like bond approval), and the occupation date. Our calculator can help you estimate the transfer duty to include in your financial planning, and this figure can be referenced in the agreement's clauses concerning costs.