Your tax affairs will now have to be in order, to buy or sell immovable property in South Africa. Property transfers just got a little more difficult, and easy, at the same time. Huh?!
Yes, the new transfer duty forms and regulations, which require detailed and onerous information, will make the administration of transfer duty and value added tax "easier", but also intoduces some other new responsibilities on all the parties to the sale of immovable property in South Africa. The new forms were recently introduced by the South African Revenue Services. This move is "promoted" as being a long-awaited streamlining of the transfer duty system, which includes the introduction of electronic payment of transfer duty. But South African taxpayers, attorneys and real estate agents are suspicious that the new regulations are also (if not primarily) a way to drag South Africans into the tax net.
Transfer Duty Streamlined
SARS has introduced seven new transfer duty forms to implement this "streamlining". The good news is that the forms are user friendly and have a simple layout. But the bad news is that the information required is very detailed not all of it is really relevant to the property transaction.
SARS claim that there are a number of practical reasons for changing the transfer duty declarations and the VAT 249 form. The new forms are supposed to be more streamlined, to facilitate the long awaited electronic lodgement and payment of transfer duty. SARS has also adapted the forms to accommodate recent legislative changes. But the wording of the new forms speaks of more than simple practical considerations in the process of paying transfer duty on immovable property transactions.
Transfer Duty Forms
The transfer duty forms are available for download from the South African Revenue Services website in .PDF format:
- Transfer Duty form 1 (TD1)
Declaration by seller - Transfer Duty Act, 1949 - Transfer Duty form 2 (TD2)
Part 1: Declaration by purchaser - Transfer Duty Act, 1949
Part 2: Receipt or exemption certificate - Transfer Duty Act, 1949 - Transfer Duty form 3 (TD3)
Annexure to Transfer Duty declaration - Transfer Duty Act, 1949 - Transfer Duty form 4 (TD4)
Part 1: Declaration in relation to a change of beneficiaries/shareholders/members - Transfer Duty Act, 1949
Part 2: Receipt or exemption certificate - Transfer Duty Act, 1949 - Transfer Duty form 5 (TD5)
Part 1: Declaration by transferor and transferee where a transaction is subject to VAT and exempt from Transfer Duty in terms of section 9(15) of the Transfer Duty Act. - Transfer Duty Act, 1949 and Value-Added Tax Act, 1991
Part 2: Receipt or exemption certificate - Transfer Duty Act, 1949 and Value-Added Tax Act, 1991 - Transfer Duty form 6 (TD6)
Annexure to transfer duty declarations for additional sellers, purchasers and properties - Transfer Duty Act, 1949 - Transfer Duty form 7 (TD7)
Declaration by estate agent relating to a change of beneficiaries/shareholders/members of a trust owning residential property or a residential property company - Transfer Duty Act, 1949
Practical Implications
Conveyancers (transferring attorneys) are now required to call for payment of the transfer duty immediately after signing the deed of sale (if transfer goes through in the usual two to three months). It will no longer be practical, or possible, for conveyancers to allow transfer duty to be paid as little as one month prior to transfer, as was previously the case.
These forms require income tax numbers, all details of non-residents, all details of use of the property, capital gains tax details, whether input tax was claimed or not, VAT details and much more. If income tax numbers are not available, the annual income from all sources must be cited in the transfer duty form.
Real estate agents have now also been roped in, as unpaid tax detectives, for the South African Revenue Services. Real estate agents will have to sign declarations, under which they must report any transactions, which involve the sale of shares, members' interests, or a change of trust beneficiaries, to SARS.
Real estate agents will have to explain the rules to their clients and hope that they are willing to cooperate. Parties to a property transaction will most likely resist providing the information and answering the questions posed by the new SARS forms. So, delays in submitting the forms, as well as payment of transfer duty could be expected. The South African Revenue Services will then in turn delay issuing a transfer duty receipt, which would delay the transfer process.
Just More Of The Same
The SARS spokesperson said that every sale of property is subject to an investigation on all taxes, when speaking about the new transfer duty tax forms. According to SARS, the "investigation on all taxes" has always been the case. But many South African real estate professionals feel that the changes to the transfer tax system represent a change in the South African tax collection philosophy, a new transfer dispensation, and a new conveyancing administration process. And this is just the kind of philosophy, which causes a concern in the property industry in South Africa.
New Transfer Duty Tax Forms
It is the South African Revenue Services' prerogative to introduce tax forms they feel necessary. And the new system should be an administrative improvement. But I don't think South African taxpayers are total fools, even if the SARS spokespersons do.
This sure looks like another tightening in the tax noose to me!
