Quarterly Report - Back

Life is not fair - get used to it! – Bill Gates recently mentioned this statement in a speech about the difficult times in which we operate. The world is a topsy-turvy place with earthquakes, cyclones, political unrest and massive corruption. In our small world, cable theft on an open street can cause an office like the Deeds Registry to be closed for 3 days at the cost of many Millions to public consumers.

These are the exciting times in which we live and opportunities present themselves daily to those who are willing to show an effort to Service excellence and client satisfaction.

Some respite was recently given by SARS in the annual budget with a substantial reduction in transfer duty rates.

The existing transfer duty exemption of R500 000 that currently only applies to natural persons is increased to R600 000.00. The transfer duty payable on the purchase of a property would then be calculated in accordance with a sliding scale between 3% and 8%. The new transfer duty exemption and sliding scale rate also apply to non-natural persons (i.e. close corporations, companies and trusts). The transfer duty rate for these persons was 8% of the value of the property to date.

These amendments will apply to properties acquired under purchase agreements concluded on or after 23 February 2011. The transfer duty payable on the purchase of property on or after 23 February 2011 would be calculated in terms of the following table:

The effect of the proposed change in the transfer duty rate on the purchase of a property with a purchase price of R1 800 000, for example, would be a saving of R28 000 if the buyer is a natural person. If the buyer is a non-natural person, the saving in transfer duty would be R83 000.

The notional input tax recovered by the purchaser may now potentially be less than the transfer duty paid upon transfer. This amendment would also increase the administrative burden for SARS and property owners substantially.

Where a VAT vendor currently acquires fixed property from a non-vendor, the vendor is entitled to a notional input tax deduction. This notional input tax deduction is, however, limited to the transfer duty that the vendor paid on the acquisition of the fixed property.

It is proposed that a vendor's notional input tax deduction no longer be limited to the transfer duty paid on the purchase of the fixed property, but be limited to the tax fraction (i.e. 14/114) of the lower of the following amounts:
- The selling price payable for the property;
- The open-market value of the property;
- The current municipal value of the property; and
- The VAT-inclusive acquisition price, including improvements, by the non-vendor selling the property.

The New Consumer Protection Act comes in operation from the 1st of April 2011, and the impact on property transactions will surely be felt in the coming months as the regulations and salient provisions become clear. Clients should make use of this time to have their Attorney check their Agreements for possible impact of the new legislation. Implied warranties and protective measures inserted previously by suppliers will need to be clearly brought to the attention of Consumers and matters such as the “Voetstoots” clause, “cooling-off” amounts, time periods and auctions sales will be the spotlight pertaining to property transactions in the future.

You are also reminded of the ongoing tax benefit to transferring your primary residence from a Company, Close Corporations or Trust to your personal name free of transfer duty implications and we continue to provide regular advise to clients on this benefit which is in place until the end of 2012.

Finally, we wish the City of Tshwane Metropolitan Municipality all the best with their change-over to a SAP program and only hope that the transition will be more successful than the horror story experienced in Johannesburg. We also trust that the significant delays experienced by the SARS enhanced E-filing transfer duty system will be rectified and that SARS can start to issue receipts and provide customer service as fast as they demand payment of Tax.

On the lighter side it is hoped that by the time we write our next Newsletter, the Proteas will be crowned World Champs and the Bulls would have won a home game again at Loftus.

Recent Achievements

• Firm was recently appointed on two large developments which will commence during 2011;
• The Firm expanded with the appointment of two additional staff members;
• The Firm completed its first disolution of Trust and Transfer of Assets for transfer duty exemption purposes;
• The Firm contributed to a charity for cancer patients;