Article taken from MoneywebTax.co.za

Dear MoneywebTax.co.za

I am a first time home buyer, now the transferring attorneys have asked for my tax number. What does Sars have to do with buying property?

Answer:

ANY TRANSFER of immovable property in South Africa gives rise to the payment of transfer duty, which is levied under the Transfer Duty Act.

Follow up:

The property cannot be transferred into your name until the duty has been paid or a declaration has been submitted to the effect that the transaction is exempt from transfer duty (eg, property purchases by public benefit organisations, or property transactions where VAT is charged).

In addition to the receipt for transfer duty, the seller needs to complete a declaration (Form TD1), as does the purchaser (Form TD2). Information required on such declarations include the income tax numbers of the purchaser, seller, and estate agent (where applicable).

Transfers of property have been known to be put on hold in cases where the tax compliance records of any of the parties has not been up to scratch-yet another weapon that SARS has at its disposal in order to ensure tax compliance.

Most property transactions must be registered with the Registrar of Deeds and registration cannot take place without a transfer duty receipt / exemption certificate from SARS. However, such registration of transfer is not required in cases where fixed property is registered in the name of a trust, company or close corporation and there is merely a change of beneficiaries, shareholders or members.

Sars therefore requires that estate agents who are party to transactions involving trusts owning residential property or residential property companies (including close corporations) complete a declaration (Form TD7).

Such declaration is required because although such changes of ownership do not require registration of transfer in the Deeds Office (since technically the ownership of the property itself has not changed), such transactions are still subject to transfer duty, and in the past many purchasers have managed to evade transfer duty by failing to declare the purchase of the shares to Sars.