Transfer Duty, Withholding Tax & Capital Gains Tax (CGT) 2017

With the announcement of the annual budget towards the end of last month, Minister of Finance, Pravin Gordhan focused on key issues of reducing government spending and working towards radical economic change.  While the main interest for most of us was the rise in Income Tax, for those looking to purchase or sell property it was an important time to take note of the changes of taxes relating to the property sector.

Taxes most relevant to the property sector are Transfer Duty, Withholding Tax and Capital Gains Tax (CGT).  Each had changes worth noting for the property buyer and seller, but let’s have a look at the main one first.


Transfer Duty

The big (and welcome) change was the increase in the Transfer Duty exemption, rising to R900 000 from the previous R750 000, meaning you’ll only start to pay Transfer Duty on properties over the R900k mark.

On transactions that are over R1 250 000, Transfer Duty is calculated by a set fee plus a percentage of the amount over a certain figure.  While the percentages remained the same, the set fees saw a slight reduction, meaning an overall reduction in the Transfer Duty costs.

In real terms this means that if you were purchasing a property for R2 million the Transfer Duty would previously have been R65 000 whereas with the new figures for the 2017/18 year it will now be R60 500, a reduction of R4 500.

Below is a table setting out the pricing brackets for Transfer Duty

Acquisition of property by all persons:

Value of Property (R) Rate
0 – 900 000 0%
900 001 – 1 250 000 3% of the value above 900 000
1 250 001 – 1 750 000 10 500 + 6% of the value above 1 250 000
1 750 001 – 2 250 000 40 500 + 8% of the value above 1 750 000
2 250 001 – 10 000 000 80 500 + 11% of the value above 2 250 000
10 000 001 and above 933 000 + 13% of the value above 10 000 000

A more detailed Transfer & Bond Cost sheet listing Transfer Duty, total transfer and bond costs is available by clicking here.

Withholding Tax

This provisional tax is withheld on behalf of Non Resident sellers of immovable property in South Africa to be set off the against the normal tax liability of the Non Resident.

The Non Resident Individual will now be liable for 7.5% of the value of the sale of the property, up from the previous 5%.  Non Resident Companies will now be at 10% and Non Resident Trusts at 15%.

Non Resident Individuals can (in certain circumstances) reduce this percentage by applying for a Tax Directive where certain expenses are tax deductible.

Capital Gains Tax (CGT)

Non Residents are liable for Capital Gains Tax (CGT) on profits made on disposal of their South African immovable property.  If the property in SA is the only property owned by the Non Resident, and they rent a house overseas, then they are entitled to a primary resident rebate on the first R2 million profit earned.  If this is not the case, then the full profit will be subject to CGT.

Maximum effective rate of tax:

Individuals & Special Trusts 18%
Companies 22.4%
Other Trusts 36%

It is important to take note of any and all expenses and taxes related to the purchase and/or sale of property.  Speak to a professional to get the best advice possible.

For further information on purchasing or selling property in South Africa as a Non Resident, please contact us.