SA must fol­low UK ex­am­ple on trans­fer taxes

Weekend Argus (Saturday Edition) - - PROPERTY -

COUN­TRIES that gen­uinely place a high value on in­di­vid­ual home own­er­ship al­most al­ways en­sure that their prop­erty trans­fer tax is low, and if South Africa re­ally wants to re­vive its hous­ing mar­ket, it should re­view the trans­fer duty scale, says Tony Clarke, MD of Raw­son Prop­er­ties.

“First world economies are slowly pulling out of re­ces­sion and the SA econ­omy, al­though likely to lag six to eight months be­hind, has turned the cor­ner. Now is the time to get res­i­den­tial prop­erty mov­ing – and a re­duc­tion in trans­fer tax would be an ex­cel­lent way to do it,” says Clarke, “es­pe­cially as a fur­ther drop in in­ter­est rates is now gener- ally con­sid­ered un­nec­es­sary.”

Clarke says SA buy­ers pay no trans­fer duty on prop­er­ties priced at R500 000 or less. For prop­er­ties up to R1 mil­lion, the rate is 5 per­cent and above R1 mil­lion the duty payable is R25 000 plus 8 per­cent of the price.

By con­trast, says Clarke, the UK Rev­enue Ser­vices charge what is known as Stamp Duty Land Tax (SDLT) at a sig­nif­i­cantly lower rate. On any prop­erty val­ued be­low £125 000 (R1 527 000), Bri­tish home buy­ers pay no tax at all. Up to £250 000 they pay only 1 per­cent tax. Up to £500 000 they pay 3 per­cent and above £500 000 they pay 4 per­cent.

Stress­ing how de­bil­i­tat­ing SA taxes can be, Clarke said that, on the S A e q u iv a l e n t o f t h e n o - d u t y £125 000, the SA buyer would have to find R65 000 in trans­fer duty. On a home of £250 000, the Bri­tish tax­payer would pay only £2 500 (R28 750) in trans­fer duty but the SA tax­payer would have to find R185 000.

“The lat­est Absa fig­ures show that the av­er­age house in SA to­day is priced from R850 000 to R950 000. Buy­ers have to find more than R20 000 in trans­fer duty, as well as rates and levy clear­ance fees, deeds of­fice fees and VAT. Bear­ing in mind that most buy­ers also have to have a 10 per­cent de­posit (as the banks are stick­ing to the Na­tional Credit Act cri­te­ria) it is not at all sur­pris­ing that buy­ers are still back­ing off.”

Clarke also be­lieves SA should adopt the UK prac­tice of tax­ing on the use to which the prop­erty is put and not on the hold­ing en­tity it is bought through. In SA close cor­po­ra­tions, com­pa­nies and trusts pay about 8 per­cent of the full price in trans­fer tax ir­re­spec­tive of the build­ing’s pur­pose.

If a re­view of taxes is un­der­taken, says Clarke, he would sug­gest that all homes worth up to R1 mil­lion pay no trans­fer duty.

“If the pro­posed mea­sures are im­ple­mented, the short­fall could be made up through other taxes, in part per­haps by higher taxes on im­ports – which would stim­u­late lo­cal man­u­fac­tur­ing,” says Clarke.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.