When is the Sale of a Property subject to VAT?

In a property sale transaction in South Africa, either Transfer Duty or VAT is payable to the South African Revenue Service (SARS), but not both. Here’s the distinction:

1. Transfer Duty:
   • Payable when the seller is not registered for VAT.
   • It applies to the sale of property where VAT does not apply.
   • The buyer is responsible for paying Transfer Duty to SARS.
   • The amount is calculated based on the purchase price, using a sliding scale.
2. VAT (Value-Added Tax):
   • Payable when the seller is registered for VAT, such as in the case of property developers or businesses.
   • The seller must include VAT in the purchase price if applicable.
   • In this case, no Transfer Duty is payable.
   • VAT is currently charged at a rate of 15%.

In summary, if VAT applies to the transaction, Transfer Duty will not be charged, and vice versa.

• Transfer Duty is payable by the purchaser and is levied based on the property’s value. This applies when the seller is not registered for VAT.
• VAT is an indirect tax, currently set at 15%, applicable to the sale of goods and services, including certain property transactions. When the seller is a registered VAT vendor and the property is part of their VATable enterprise, VAT is included in the sale price and payable by the seller to SARS.

In these cases, the buyer does not pay transfer duty, as VAT takes precedence over transfer duty for VATable transactions. The VAT is factored into the total transaction cost.

• If the seller is not a registered VAT vendor, or if the property does not form part of their VATable enterprise, transfer duty will be payable by the purchaser to SARS.
• If the purchaser is a registered VAT vendor, they are still required to pay the transfer duty, but they can claim this amount back from SARS as an input tax deduction after the transaction is registered, assuming the property is purchased for use in a VATable enterprise.

This allows VAT-registered purchasers to recover the transfer duty, providing a level of tax relief in such cases.