select
|

Explained: the differences between transfer fees and VAT

When purchasing a commercial property from a legal entity, there is a common misconception that no transfer fees, or alternatively, any costs linked to transfer are applicable.

“Buyers often confuse transfer fees as a whole with VAT when they are in the process of conducting a commercial property purchase,” says Jason Gregoriades, a member of the Rawson Property Group’s Commercial Business Development Team in Cape Town.

Although it is possible to own commercial property in one’s personal capacity, it is more common that a commercial property is owned by a legal entity. This being so, one must always keep in mind the difference between the actual transfer fee payable and the other costs linked to the transfer process of a commercial property, collectively known as the transfer costs.

It is, at all times, necessary for the purchasing party to pay the usual set costs, such as the conveyancers' fee, the administration fee and the Deeds Office fee, all of which are required as part of the transfer of a commercial property. Therefore, one must not assume that when purchasing a commercial property from a legal entity there will be no costs linked to the transfer. There is the likely possibility that along with the collective costs linked to the transfer, the individual transfer fee or VAT may also be applicable.

Transfer fees versus VAT   

By illustrating three possible scenarios, Gregoriades offers clarification of whether the transfer fee or VAT is payable on the sale of a commercial property. “A transfer fee is applicable to a commercial property sale when the selling entity is not VAT registered and the purchase price is greater than the stipulated threshold of R750,000,” he explains.

“Transfer fees are not applicable to a commercial property sale when the selling entity is VAT registered, in this case, VAT is applicable”, says Gregoriades “However, neither a transfer fee nor VAT is applicable when the entity is not VAT registered and the purchase price is R750,000 and below.”  

Calculating the fees                                                                                                           

“The transfer fees are calculated according to a tiered scale which begins at 3% of the purchase price,” says Gregoriades. “At no stage will the transfer fee equal or exceed 14% of the purchase price,” he adds. VAT, when applicable, requires no minimum price to be in effect and is calculated as 14% of the selling price.

It is necessary for  both the purchaser and seller to familiarise themselves with the various transfer costs applicable to the sale of a commercial property, in order to avoid presumptions, incorrect calculations or potential delays.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 25 May 2018
      Reliable public transport systems moving a mass of commuters to and from work, keep a city’s economy moving. Not only do they have a positive impact on economic growth, successful rail links also influence property values.
    • 25 May 2018
      The live, play and visit environment that Centurion Residential Estate & Country Club offers continues to attract buyers looking for a very specific lifestyle and ambiance.
    • 25 May 2018
      As expected, the Monetary Policy Committee kept the repo rate stable, with analysts and market commentators ahead of yesterday's announcement (24 May 2018) pointing to a more hawkish stance amid a weaker rand, somewhat less stable global environment, and an eye on the inflation outlook – coupled with the increase in VAT and sizeable hike in the price of fue
    • 24 May 2018
      Most real estate professionals agree that 2017 was one the toughest years to date; an eminently challenging 12 months that subdued even the strongest markets - including the country’s economic powerhouse of Sandton.
    • 24 May 2018
      These are uncertain and challenging times for the real estate industry, but the non-profit organisation Rebosa is fighting for their interests and finding pragmatic solutions to industry issues such as the urgent need to fast-track transformation says Richard Gray, Rebosa chairman.
    • 24 May 2018
      The decision to invest in property isn’t one that’s taken lightly, or dealt with flippantly. The same should ring true when deciding on an estate agent partner to handle the letting out of your property.
    • 23 May 2018
      Homeowners who are thinking of selling and “trading up” to a bigger or a better home had better be quick now if they want to get the best deal.
    • 23 May 2018
      The new Loftus Park development in Arcadia is really going to boost the demand for homes and rental accommodation close by and the neighbouring suburb of Sunnyside, says Gerhard Kotzé, MD of estate agency group RealNet Holdings.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK