How and When Can You Legally Avoid Paying Transfer Duty?
When you buy a house or property, there are two main financial things you must pay besides the purchase price: Transfer Duty (a tax) and Transfer Costs (fees for the lawyers and admin).
This article explains how you can sometimes avoid paying the Transfer Duty tax.
The Tax You Have to Pay (Transfer Duty)
Transfer Duty is basically a government tax you pay when you buy property. It’s calculated based on the property’s value, and the buyer is responsible for paying it to the South African Revenue Service (SARS).
- The Important Rule (As of April 1, 2025): If the property is valued below R1.2 million, you DO NOT have to pay any Transfer Duty. This is an important saving!
- The Rates: If the property is valued above R1.2 million, the tax starts at 3% and goes up in steps, maxing out at 13% for very expensive properties (over R13.3 million).
Transfer Duty vs. Transfer Costs: They Are Different!
It's easy to confuse these two, but they cover different things:
Feature | ||
What is it? | A Tax paid to the government (SARS). | Legal and admin fees for the transfer process. |
Who pays it? | The Buyer. | The Buyer. |
Who gets the money? | SARS (the government). | The Conveyancer (the attorney handling the transfer). |
When is it paid? | Right before the property title is registered. | At the very start of the process. |
Key Takeaway: If you are excused from paying Transfer Duty (the tax), you still must pay the Transfer Costs (the lawyer/admin fees).
When Can You Avoid Paying Transfer Duty? (Exemptions)
The law allows several reasons—called exemptions—where you don't have to pay the Transfer Duty tax, even if the property is over the R1.2 million limit.
Here are the most common exemptions for individuals:
1. Low-Value Property (Section 2)
- You don't pay if the property's value is less than R1.2 million (effective April 2025). This applies to everyone, whether you are an individual or a company.
2. Inheritance (Section 9(1)(e))
- If you inherit a property directly from a deceased person's estate (whether through a will or not), you don't pay Transfer Duty.
- Important: This only applies to the original transfer to the person inheriting it. If the inheritor later sells the property, the new buyer will have to pay the tax (unless another exemption applies). This exemption only applies to people, not companies or trusts.
3. Divorce Settlement (Section 9(1)(i))
- If property is transferred between ex-spouses as part of a formal divorce settlement or court order, no Transfer Duty is paid. The lawyer will just need a copy of the divorce order to prove it.
4. Married in Community of Property (Section 9(1)(k))
- If you get married In Community of Property and your spouse already owns a home, you automatically own half of it. The formal change in ownership on the title deed is exempt from Transfer Duty.
5. VAT Transaction (Section 9(15))
- If the seller is a VAT-registered business (like a property developer) and the property sale includes VAT (Value-Added Tax), the buyer does not have to pay Transfer Duty. This prevents you from paying two taxes on the same transaction.
How to Claim the Exemption
You don't simply skip the payment. Even if you qualify for an exemption, the transfer process is still formal:
- The Conveyancer's Role: Your lawyer (conveyancer) must formally declare the reason for the exemption to SARS via their eFiling system.
- SARS Proof: SARS reviews the documentation (like the divorce order, or proof of inheritance) and issues a Transfer Duty Exemption Receipt.
- Deeds Office: This official receipt must be submitted to the Deeds Office. The Deeds Office will not register the transfer of the property into your name without this receipt (or the one showing the tax was paid).
Conclusion
Knowing the difference between Transfer Duty (the tax) and Transfer Costs (the fees) is crucial. By understanding the exemptions, you can significantly reduce the costs of buying property, especially in common situations like inheritance or divorce. Always work closely with your conveyancer to ensure the correct paperwork is filed with SARS.