Transfer Duty vs VAT: Which Tax Applies to Your Property Purchase?

Every property purchase in South Africa attracts one of two taxes: transfer duty or value-added tax (VAT). It is always one or the other, never both. Which one applies depends not on the property or on the buyer, but on the tax status of the seller — and the difference can run to hundreds of thousands of rand. Establishing the correct tax treatment before signing is therefore one of the most important checks in any property transaction, and it is one of the first things we examine when a sale agreement crosses our desk.

What is transfer duty?

Transfer duty is a tax levied under the Transfer Duty Act 40 of 1949 on the acquisition of immovable property. It is payable by the purchaser and must be paid to SARS within six months of the date of acquisition. In practice it is paid well before then, because the Deeds Office will not register a transfer unless SARS has issued a transfer duty receipt — or an exemption receipt — confirming that the duty position has been settled.

The duty is calculated on the purchase price or the fair value of the property, whichever is the higher, according to a sliding scale that National Treasury reviews in the annual Budget.

The current transfer duty table

The rates below took effect on 1 April 2025, and SARS has confirmed that they remain unchanged for the 2026/27 duty year that began on 1 April 2026:

• R1 to R1 210 000: 0% — no transfer duty is payable
• R1 210 001 to R1 663 800: 3% of the value above R1 210 000
• R1 663 801 to R2 329 300: R13 614 plus 6% of the value above R1 663 800
• R2 329 301 to R2 994 800: R53 544 plus 8% of the value above R2 329 300
• R2 994 801 to R13 310 000: R106 784 plus 11% of the value above R2 994 800
• Above R13 310 000: R1 241 456 plus 13% of the value above R13 310 000

The same table applies whether the purchaser is a natural person, a company or a trust. Because the first R1 210 000 of value attracts no duty at all, many entry-level and first-time buyers pay nothing to SARS on their purchase. To see what a specific transaction would cost — including conveyancing fees, which are charged separately from transfer duty — you can use our bond and transfer cost calculators.

When VAT applies instead

If the seller is a registered VAT vendor and the property is sold as part of the seller's enterprise, the sale is a taxable supply and VAT applies at the standard rate of 15%. Typical examples include a developer selling units in a new development, a VAT-registered letting enterprise selling a commercial building, or a business selling the premises from which it trades.

Where VAT applies, section 9(15) of the Transfer Duty Act exempts the transaction from transfer duty, so the purchaser pays no duty to SARS. The price, however, carries VAT — and here the drafting of the agreement is critical. Under the Value-Added Tax Act 89 of 1991, a stated price is deemed to include VAT unless the agreement clearly provides otherwise. A vendor who sells for R5 million without addressing VAT may discover that R5 million is the VAT-inclusive figure, surrendering roughly R652 000 of the price to SARS.

Note that the buyer's own VAT status is irrelevant to this question: it is the seller's status that determines whether the transaction attracts VAT or transfer duty. A VAT vendor who buys property from a non-vendor pays transfer duty in the ordinary way, although it may be entitled to a notional input tax deduction if the property will be used to make taxable supplies.

Zero-rated sales of a going concern

There is an important middle path for commercial transactions. Section 11(1)(e) of the VAT Act allows an enterprise to be sold as a going concern with VAT charged at the rate of zero per cent, provided the requirements of that section are met. In broad terms:

1. both the seller and the purchaser must be registered VAT vendors;
2. what is sold must be an enterprise — or a part of an enterprise capable of separate operation — that is an income-earning activity on the date of transfer;
3. the assets necessary for carrying on the enterprise must be included in the sale; and
4. the parties must agree in writing that the enterprise is sold as a going concern and that the price is inclusive of VAT at zero per cent.

The classic example is a tenanted commercial or industrial building sold with the leases in place: the letting enterprise continues uninterrupted in the purchaser's hands. Zero-rating is enormously valuable, because the purchaser pays neither transfer duty nor VAT in cash. But the requirements are strict. If any one of them fails — the purchaser's VAT registration is not in place in time, or the building is standing empty on the date of transfer — SARS may assess the transaction at 15%, a result no purchaser wants to discover after registration.

Common pitfalls we see

• Sale agreements that are silent on VAT, leaving a vendor-seller to absorb 15% out of the agreed price.
• Going-concern clauses copied into agreements where the requirements of section 11(1)(e) are plainly not met.
• The assumption that sales by companies or trusts automatically attract VAT — they do not; only a VAT vendor selling enterprise property charges VAT.
• Buyers budgeting for transfer duty on a new development purchase, where the price is in fact VAT-inclusive and no duty is payable at all.

Getting the tax treatment right from the start

The tax treatment of a property sale is fixed by the facts and by the wording of the agreement — not by what the parties later wish they had recorded. As part of our conveyancing services, we confirm the seller's VAT status, make sure the agreement deals expressly with VAT or transfer duty, and attend to the SARS receipt required before registration. If you are buying or selling and are unsure which tax applies, speak to us before you sign.