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
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
        
    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