Delinquent tax affairs can slow property transfers

Buyers and sellers anxious for a smooth transfer of property ownership should ensure their tax affairs are in order and able to stand the full scrutiny of the Receiver of Revenue, otherwise the department could slow the process by refusing to issue transfer duty receipts.

Bruce Forrest of Meumann White Attorneys says with the recent introduction of the new transfer duty forms by the Receiver of Revenue, to facilitate the soon to be implemented electronic method of obtaining transfer duty receipts has come the necessity for both the seller and purchaser to disclose their income tax numbers and VAT reference numbers.

One of the reasons advanced by SARS for the prescribed new forms, says Forrest, is to tighten the tax net “and they view property sales as the starting point to ensure general tax compliance.”

“The Receiver, on receipt of an application for the transfer duty receipt, will check both the seller and purchasers' tax registration, payment of taxes and ensure all their tax paper work is in order.”

Forrest says the Receiver will not issue a transfer duty receipt if either the seller or the purchaser's general tax affairs are not in order. The process of checking the respective parties' tax affairs, he says, invariably delays the issuing of the transfer duty receipt and the delay may be more pronounced should the transaction indeed involve a seller or purchaser whose tax affairs are not in order.

Forest also notes that although property registrations were expected to be speeded up with the advent of new and faster electronic systems within banks, local authority offices, SARS offices and conveyancers, this is not the case.

He attributes the slower processing of Rates Clearance Certificates in part to the huge volumes brought about by the amalgamation of smaller local municipalities into one centralised facility under one Rates department in Durban.

The system is further lumbered by the Rates Department referring applications for rates clearance to the Consolidated Billing Department Hill to check for any outstanding water and electricity accounts in respect of the property. “If there are outstanding accounts, then these are included in the figures due before that Rates Clearance can be issued.”

But before the Rates Department even considers the rates application, Forrest says the application goes to the Real Estate department and the sale price is assessed in relation to the municipal valuation.

“There are different permitted variances for the various residential areas, for example the variance allowed in the Umhlanga area is 300% whereas the variance permitted in Pinetown is 150%.

“Should the selling price in relation to the municipal valuation differ from the accepted variance, then valuers opinions are sought on whether an inspection of the property is warranted. A matter will also be referred to a valuer if the Municipality records reflect that there are building plans outstanding.

Forrest says the inclusion of Consolidated Billing and the Real Estate Departments in the processing of rates clearance certificates have both contributed to the delay in the issuing of a Rates Clearance Certificates.
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