Transfer Duty vs. VAT: Understanding the Difference in Property Sales | Barter McKellar

When buying a property in South Africa, one of the most important cost considerations is whether you will pay Transfer Duty or VAT (Value-Added Tax). These two taxes do not apply together, and whether you pay Transfer Duty or VAT depends on the seller's tax status and the type of property transaction.

At Barter McKellar, we specialize in property law and conveyancing, guiding buyers and sellers through the legal and financial aspects of property transfers. In this guide, we explain the differences between Transfer Duty and VAT, when each applies, and how they affect your property purchase or sale.

1. What Is Transfer Duty?

Transfer Duty is a tax levied by SARS (South African Revenue Service) when ownership of a property changes hands. It is paid by the buyer when purchasing a pre-owned (second-hand) property from an individual or an entity that is not VAT-registered.

When Is Transfer Duty Payable?

✔ When buying a residential or commercial property from a seller who is not VAT-registered.
✔ When transferring ownership of land or a building through a sale or donation (unless exempt).
✔ When buying an existing home (previously owned property) from a private individual.

Transfer Duty Rates in South Africa (2024)

For property purchases over R1,100,000, Transfer Duty is calculated on a sliding scale:

• R0 – R1,100,000 → 0% (No Transfer Duty)

• R1,100,001 – R1,512,500 → 3% on value above R1,100,000

• R1,512,501 – R2,117,500 → R12,375 + 6% on value above R1,512,500

• R2,117,501 – R2,722,500 → R46,275 + 8% on value above R2,117,500

• R2,722,501 – R12,100,000 → R85,875 + 11% on value above R2,722,500

• R12,100,001 and above → R1,026,000 + 13% on value above R12,100,000

Example: If you buy a property for R2,000,000, Transfer Duty is calculated as follows:
✔ R12,375 + 6% of (R2,000,000 – R1,512,500) = R12,375 + R29,250 = R41,625

Tip: If you are buying a property below R1,100,000, you do not have to pay Transfer Duty.

2. What Is VAT in Property Transactions?

Value-Added Tax (VAT) is a 15% tax charged on goods and services, including certain property transactions. It is paid instead of Transfer Duty when the seller is a VAT-registered vendor (such as a property developer or a company in the business of selling property).

When Does VAT Apply Instead of Transfer Duty?

✔ When buying property from a VAT-registered seller (e.g., a developer or real estate company).
✔ When purchasing a new residential development or off-plan property.
✔ When buying a commercial property from a VAT-registered entity.
✔ When purchasing a going concern (business property including rental agreements).

Tip: The seller is responsible for including VAT in the sale price, meaning that the purchase price already includes VAT unless stated otherwise.

3. Special Cases Where VAT May Apply

A. Buying Property from a Developer

If you are purchasing a newly built home from a developer, VAT is already included in the price. This means:
✔ No additional Transfer Duty is payable.
✔ The developer must be VAT-registered.
✔ VAT is usually included in the advertised price unless stated otherwise.

Tip: Always check the Offer to Purchase (OTP) to confirm whether VAT is included or excluded.

B. Buying a Commercial Property as a Going Concern

If a commercial property is sold as a going concern (with existing tenants and leases), the transaction may be zero-rated for VAT purposes, meaning no VAT or Transfer Duty is payable if the following conditions are met:
✔ Both the buyer and seller are VAT-registered.
✔ The property is sold as a business with ongoing rental income.
✔ The transaction complies with SARS going concern requirements.

Tip: Buyers purchasing a commercial property should consult a tax expert to determine if the transaction qualifies for zero-rated VAT.

5. How to Avoid Costly Mistakes in Property Transfers

✔ Check if the seller is VAT-registered – This determines whether VAT or Transfer Duty applies.
✔ Confirm whether VAT is included in the purchase price – If not, the buyer may have to pay an additional 15%.
✔ Understand exemptions – First-time buyers and inherited properties may be exempt from Transfer Duty.
✔ Get legal advice – Work with a conveyancing attorney to ensure tax compliance and avoid surprises.

Tip: Always review the Offer to Purchase (OTP) carefully before signing to confirm whether VAT or Transfer Duty applies.

6. How Barter McKellar Can Help with Property Transfers

At Barter McKellar, we specialize in:
✔ Guiding buyers and sellers through VAT and Transfer Duty implications.
✔ Ensuring compliance with SARS tax regulations.
✔ Handling property transfers for new developments, commercial properties, and private sales.
✔ Liaising with developers, banks, and tax consultants to ensure smooth transactions.

Whether you’re purchasing a new development, a commercial property, or an existing home, our expert team ensures a hassle-free transfer process with no hidden tax surprises.