Transfer Duty Down: How Much Will You Save? 

 

How will you (and the property market generally) benefit from the proposal in Budget 2011 to reduce transfer duty?

First, the details –

 

1. The reduction will apply to all property sales on or after 23 February 2011

2. No transfer duty is payable when VAT applies to a sale

 

3. “Non-natural” persons (companies, close corporations, trusts etc), which used to pay transfer duty at a flat rate of 8%, will now enjoy the same exemption threshold and reduced rates as individuals – making it more attractive to hold property in such entities (but only where appropriate in your particular circumstances – take advice on that first!)

4. The exemption threshold increases from R500.000 to R600.000

5. From R600.001 to R1.000.000, the rate is now 3% (last year – 5% from R500.001 up)

6. From R1.000.001 to R1.500.000, the rate is now R12.000 + 5% (last year – R25.000 + 8%)

7. From R1.500.001 up, the rate is now R37.000 + 8% (last year – R65.000 + 8%)

That’s great news, particularly for property investors and first-time buyers, and thus for the property

market generally.

 

Your savings will look like this: –

  

Where the Buyer is a Company, CC, Trust etc

 

Purchase Prize

R 600.000

R 1.000.000

R 1.500.000

R 2.000.000

Duty Transfer Payable

 

 

 

 

–       Old

R 48.000

R 80.000

R 120.000

R 160.000

–       New

R 0

R 12.000

R 37.000

R 77.000

= Saving

R 48.000

R 68.000

R 83.000

R 83.000

 

Purchase Price

R600.000

R1.000.000

R1.500.000

R2.000.000

Transfer Duty Payable

 

 

 

 

–       Old

R 5.000

R 25.000

R 65.000

R 105.000

–       New

R 0

R 12.000

R 37.000

R 77.000

= Saving

R 5.000

R13.000

R 28.000

R 28.000

 

The New Companies Act – Can You Still Trade Using Your Close Corporation

 

Where the buyer is a natural person:

Close corporations have always been popular with smaller enterprises, combining the advantages

of incorporation with lower costs and simpler administration than applies to companies.

However no new CCs can be registered – and companies can no longer be converted to CCs – after

the new Companies Act comes into effect shortly (at date of writing, it’s not clear whether or not the

current deadline of 1 April 2011 will be met).

Good news here is that –

• All the advantages that CCs had will now be found in the new ‘Private Companies’, and

• Existing CCs live on – and can carry on trading indefinitely – until deregistered, dissolved, or

converted into a Private Company.

In next month’s issue, we’ll look at the question of whether or not your company or CC will require

an audit.