Transfer duty is an indirect tax paid on the acquisition of any property acquired by any person by way of a transaction or in any other way. The concepts of “acquire” and “acquisition” are not defined in the Transfer Duty Act 40 of 1949. However, the courts have consistently examined and clarified the meaning of the term “acquisition” as it relates to section 2(1), which is the main charging provision in the Transfer Duty Act. In CIR v Freddies Consolidated Mines Ltd, Centlivres CJ states the following (at 311C): “The word ‘acquired’ in the charging section (section 2) must therefore be construed as meaning the acquisition of a right to acquire the ownership of property. It has been argued that the term “transfer duty” is misleading, because it is in fact a duty imposed, among other things, on the consideration given by a purchaser of property for the right conferred on him to acquire the ownership of property.” The purpose of this article is to provide a basic overview of the circumstances under which transfer duty is applicable and to clarify the party liable for its payment in property transfers.
What is a transaction?
In terms of section 1(viii) of the Transfer Duty Act, a transaction is an agreement whereby one party thereto agrees to sell, grant, waive, donate, cede, exchange, lease or otherwise dispose of property to another person or any act whereby any person renounces any right in or restriction in his or her favour upon the use or disposal of property.
What is property?
Property is defined in section 1(1) of the Transfer Duty Act as “land in the Republic and any fixtures thereon”. The definition further includes in paragraph (a) to (g) certain items and excludes others from the category of land and fixtures. The most common forms of property and real rights in property are real rights in land, mineral rights, an interest or share in a “residential property company,” or a share in a share-block scheme.
Who pays for transfer duty?
Section 3 of the Transfer Duty Act provides that the transfer duty must be paid by the person who has acquired the property or in whose favour or for whose benefit any interest in or restriction upon the use or disposal of property has been renounced.
When is transfer duty payable?
Transfer duty is payable within six (6) months from the date of acquisition by the person who has acquired the property. In practice, this means that transfer duty is payable six months after signature of a deed of sale by the last person, irrespective of the fact that registration has not taken place. If any duty is unpaid after this six-month period, interest at a rate of 10% per year will accrue on the outstanding amount.
Transfer duty scales
The transfer duty rates applicable from 1 April 2025 to 31 April 2026 are indicated below.
| Fair market value or consideration | Rate of duty |
| R0 – R1 210 000 | 0% of the value |
| Exceeding R1 210 000 but not R1 663 800 | 3% of the amount above R1 210 000 |
| Exceeding R1 663 800 but not R2 329 300 | R13 614 + 6% of the value above R 1 663 800 |
| Exceeding R2 329 300 but not R2 994 800 | R53 544 + 8% of the value above R 2 329 300 |
| Exceeding R2 994 800 but not R13 310 000 | R106 784 +11% of the value above R2 994 800 |
| Exceeding R13 310 000 | R1 241 456 + 13% of the value exceeding R13 310 000 |
Transfer duty exemptions
There are several exemptions from the imposition of transfer duty found in Section 9 of the Transfer Duty Act. The most common exemptions are in respect of:
- the acquisition of any property under any transaction which for purposes of the Value-Added Tax Act, 1991, is a taxable supply of goods to the person acquiring such property;
- property of the deceased acquired from intestate or testamentary succession, or as a result of a redistribution of the assets of a deceased estate in the process of liquidation;
- the surviving or divorced spouse when property is acquired from the spouse as a result of the death of the spouse or upon dissolution of the marriage.
How is the value of property for transfer duty determined?
Section 5 of the Transfer Duty Act provides how the value of the property is determined for purposes of calculating transfer duty. The value of property includes:
- any consideration payable by the person who has acquired the property;
- if no consideration is payable, the declared value of the property;
- whole or partial payments of any part of the consideration by way of rent, royalty, share of profits or any other periodical payment, or otherwise than in cash. Such value shall be determined in accordance with the provisions of section 8 of the Transfer Duty Act;
- in the case of a transaction whereby one property is exchanged for another.
Certain payments are added to the consideration payable in respect of property. For the purposes of calculating the transfer duty payable, certain payments, as outlined in section 6 of the Transfer Duty Act, shall be added to the consideration payable for the acquisition of any property. This includes any commission or fees paid or payable in respect of the property by the person who acquired the property.
Conclusion
It is crucial for a person to ascertain if a transaction is exempt from transfer duty or if transfer duty is payable under the Transfer Duty Act when acquiring a property through a transaction, as this will help determine the amount payable.
If transfer duty is payable, it must be paid within six months of acquiring the property, otherwise interest will accrue at a rate of 10% per annum on any unpaid duty calculated from date of expiring of the six-month period.
Written by: Mpho Innocentia Ramatsebe
Supervised by: Johan Liebenberg
