Buy Commercial Property with zero Transfer Duty and zero VAT
If you are planning to buy commercial property, take care and you will pay no transfer duty and no VAT.
Firstly, both the buyer and the seller must be VAT registered.
This often means that clients are willing to pay our fee (currently R25 000) for a VAT registered shelf company.
Your company buys, not the building, but the business of building rental including all of the assets necessary for the business to continue as an income earning going concern (including, of course, the building).
The building must be income earning at the time of the purchase (i.e. not be standing empty).
You need a special offer to purchase (in fact it is a special Sale Agreement) drawn up by us or an attorney who is familiar with SARS’ special requirements.
The sale will then be zero VAT rated by SARS and you will pay no Transfer Duty either, because VAT trumps Transfer Duty.
If you get it wrong, you will have to pay the VAT to the seller and claim it back from SARS. We are dealing with one right now. The VAT refund is R11m and SARS required documentation for audit which was submitted on 18 July. Nine weeks later our client is still waiting for his money.
7 comments
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Can one apply the same principle as your article when the underlying property is a vacation rental house that is rented out on Airbnb? E.g. you buy the company that owns the property. In this circumstance can one get away without having to pay transfer duty?
Why does the buyer need to be VAT registered? If you are buying a company, VAT registered or not, this wouldn’t attract VAT.
The transfer of shares in a Residential Property Company attracts Transfer Duty on the selling price of the shares (as the shares are deemed to be property).
The purchase of any company (except a shelf company from a reputable supplier) is full of risks of skeletons in the cupboard, so would not be recommended anyway.
The buyer does not have to be VAT registered. My article refers to commercial property, not residential property.
Good afternoon Derek
Is there transfer duty payable on commercial property if my client bought the shares of the company holding the property? And who is liable for that transfer duty?
Thanks
Hi Dawie,
If it were residential property then there would be transfer duty on the purchase price of the shares and this would be payable by the purchaser. However, in this instance it is commercial property and there is not transfer duty. There is Securities Transfer Tax payable by your friend at 0,25% of the purchase price.
Good afternoon
Is there transfer duty payable property if only the shares of the property company, holding the asset has been sold? And who is liable for that transfer duty?
Thanks
Hi there,
Please could your clarify your article for me.
Hi Colleen,
It’s difficult to clarify if I don’t know what is not clear. I can suggest two options –
1) Book a free Google Meet or Zoom meeting with me via https://harbourassociates.youcanbook.me/
2) Read my on-line book “16 Steps to Wealth” in which I deal with all aspects of property investment, wealth creation and protection from creditors and unnecessary taxes. You find it at https://www.mylegacytrust.co.za/