Property structures to use when buying residential property

Private Property South Africa
Private Property Reporter

Hello everyone. Jose Delgado here from iProtect and today we're going to be tackling a query that comes up quite often. People are a little confused around what the different consequences are, if I buy a property into my name, or into close corporation, or into a company, or into a trust.

Many years ago there were different rates relevant to different entities that acquired property. The law has changed quite some time back, and for a number of years now everybody pays the same rates. Whether you buy a property into your name, into a close corporation, into a Pty Limited, or into a trust, the rate is exactly the same. The Minister in his budget speech just a couple of weeks ago has raised the new transfer duty rates, and they're as follows. Any acquisition under 750,000 rand, no transfer duty. Property acquisitions from R750,000 to R1.25 million is 3%. From R1.25 million to R1.75 million, it is R15,000 plus 6%. From R1.75 million to R2.25 million it is R45,000 plus 8%. Anything over R2.25 million, is R85,000, plus 11% of any value over that.

Just to also conclude, sometimes VAT is applicable to a transaction. Often you will see advertisements that will stipulate No Transfer Duty. Don't be duped. You are paying VAT at a rate of 14%, which is in fact higher than buying a property into your own name and paying transfer duty. The only upshot of course is if you're buying a property from a developer that includes VAT, the banks are going to fund that portion. It is lighter on the pocket, or you don't have to come up with those extra duties or costs, but just note that there is VAT at 14%.

Commercial properties also are a different kettle of fish. You sometimes are able to zero rate property transactions if the property is being conducted as a letting enterprise. You can buy a property from a seller that is a VAT vendor into an entity that is a VAT vendor too, and you can zero rate the transaction, and there's no duty, and there's also VAT charged at the zero rate.

In conclusion, no difference whether you buy into your own name, a CC, Pty, or a trust, so don't let that be a factor that would dissuade you from using a particular structure. Also, remember commercial properties have VAT.

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