Transfer Duty on sale of a company owning residential property
Once upon a time, you could sell the shares in a company that owned fixed property and only pay Securities Transfer Tax (1/4%). Then in December 2002 it all changed.
That was a long time ago, but many people still don’t understand the full implications, so here they are –
A Residential Property Company is one which owns a dwelling or dwellings and their fair value exceeds 50% of the assets of the company, excluding financial instruments.
If shares in that company are sold, then the shares are treated as fixed property and the sale attracts Transfer Duty, not on the value of the properties, but on the sale price of the shares. If the buyer and seller are connected persons, then the sale will be deemed to have been made at market value. Anyone can determine this market value, but SARS can (but seldom does) challenge the valuation.
The rates of Transfer Duty are –
It is the purchaser who pays the Transfer Duty, whilst the seller pays any Capital Gains Tax. Securities Transfer Tax is not payable under these circumstances.
Only a registered conveyancer can submit a Transfer Duty return.
This only applies to residential property and not to commercial property.