Transfer Duty: The Basics

Think of transfer duty as the government's "entrance fee" for recording that a property now belongs to you. Every time immovable property — a house, an apartment, farmland, commercial premises, even a parking bay — changes hands in South Africa, one of two taxes becomes payable: transfer duty or VAT. The golden rule is simple: it's always one or the other, never both, and never neither.

Transfer duty is governed by the Transfer Duty Act 40 of 1949 and has been part of South African law since 1 January 1950. The tax isn't new — in fact, our whole system of land registration traces its roots to Dutch transfer duty laws dating back to 1598.

The tax is calculated on the value of the property acquired — not necessarily the price you agreed to pay. SARS uses whichever is higher: the purchase price or what the property is genuinely worth on the open market. This is an important distinction, especially in family deals where properties are sold at a discount.

The law uses a sliding scale to determine how much is owed, with lower-value properties attracting a smaller percentage than high-value ones. Properties below a set threshold pay nothing at all — a welcome relief for entry-level buyers. The scales are updated by National Treasury from time to time, so it's always worth checking the latest figures with your conveyancer.

A few key terms worth knowing:

Here's the short answer: the person who acquires the property pays the duty. In a straightforward sale, that's the buyer. In a donation, it's the person receiving the gift. In an exchange, both parties pay duty on what each acquires.

One common misconception is that because the sale agreement says the buyer pays transfer duty, the seller is completely off the hook legally. While the parties can agree to rearrange responsibility contractually, in the eyes of SARS, the acquirer is always the primary obligation-bearer. Your conveyancing attorney will guide you on how your specific sale agreement handles this.

Transfer duty must be paid to SARS within six months of the date of acquisition. For a sale, that clock starts ticking from the moment the sale agreement is signed — not from when any conditions (like bond approval) are fulfilled, and not from the date of registration. This catches many buyers by surprise.

For properties acquired by means other than a sale — such as through inheritance, donation, or exchange — the six-month period runs from the relevant date of acquisition for that type of transaction. In the case of an inheritance, for instance, the date of acquisition is the date the person passed away.

Failing to pay on time is not a criminal offence — you won't be arrested. But it will cost you money. Interest accrues on the unpaid amount at 10% per annum, calculated on a month-by-month basis for every completed month that passes after the six-month deadline.

The interest compounds on a per-completed-month basis — not daily. So if your deadline was 31 January and you pay on 15 March, you'll be charged for one completed month (February). If you pay on 2 April, two completed months apply. This makes early payment within any given month strategically worthwhile.

There is one silver lining: if you've already made a deposit with SARS — for instance, while awaiting a valuation — that deposit counts toward the interest calculation. In other words, making a partial deposit before the deadline can limit how much interest accumulates on the remainder.

Gone are the days of queuing at a SARS office with a cheque. Since 1 April 2011, all transfer duty must be submitted and paid electronically through SARS's eFiling system. Manual payments are no longer accepted — full stop.

Your conveyancing attorney handles the entire eFiling process on your behalf. They submit the declaration, receive the SARS assessment, and arrange electronic payment. Once payment clears, the system automatically releases a digital transfer duty receipt (TDREP) — the critical document that must accompany your transfer documents when they're lodged at the Deeds Office.

No transfer of property can be registered at the Deeds Office without this receipt or its equivalent exemption certificate. It is a non-negotiable prerequisite for registration. If your transaction qualifies for an exemption, an exemption certificate (rather than a receipt) is issued — but the process is identical.

Before SARS releases the transfer duty receipt, both the buyer and the seller must sign a transfer duty declaration. This isn't optional paperwork — it is a formal legal declaration to the South African Revenue Service confirming the details of the transaction.

The declaration captures the key facts: who the parties are, what property is being transferred, the agreed purchase price, and the date the transaction was concluded. SARS uses this information to assess how much duty is owed — and to cross-reference other tax obligations both parties may have.

Deciding to give property to a family member — your children, a sibling, a spouse — feels like a generous, simple act. But in South African law, a property donation triggers two separate taxes, and understanding both is essential before you proceed.

Because no cash changes hands in a donation, SARS needs a declared value — essentially what the donor and recipient state the property to be worth. However, SARS retains the right to substitute the fair market value if they believe the declared value understates the property's true worth. Attempting to donate property at an artificially low value to reduce the tax burden is a red flag for SARS.

The six-month rule applies equally to donations. The recipient must ensure transfer duty is paid within six months of the date of the donation — otherwise the same 10% per annum interest applies. Interestingly, even if the donation is subject to a condition (for example, "I give you this property on condition that you care for me until I die"), transfer duty is still due within six months of the original donation date, not when the condition is fulfilled.

Sometimes two parties agree to swap properties rather than involve cash — "I'll give you my farm; you give me your seaside cottage." This is called an exchange transfer, and yes, transfer duty is still payable on both sides of the deal.

How the duty is calculated depends on whether any additional top-up payment (consideration) passes between the parties to balance out any difference in property values.

Exchange transfers require the transfer documents to include a clear description of the exchange arrangement — what each party is giving, what they're receiving, and what (if any) cash consideration is also changing hands. This transparency allows SARS to correctly assess the duty owed by each party.