Why You Need a Tax Number to Buy Property

What SARS Has to do With Property

When it comes to buying your first home, there are a number of things required by various parties that can prove extremely complicated. For instance, the transferring attorneys will ask for your tax number. Now many of you might like to know what on earth SARS has to do with buying property.

The answer is simple: any transfer of immovable property in South Africa gives rise to the payment of transfer duty, which is levied under the Transfer Duty Act. The property cannot be transferred into your name until the transfer duty has been paid or a declaration has been submitted citing that the transaction is exempt. The latter involves purchases by public benefit organizations or property transactions where VAT is charged.

As well as the receipt for transfer duty, the seller needs to fill out a declaration (Form TD1), as does the buyer (Form TD2). The information that is required on these declaration forms includes the income tax numbers of the buyer, seller and estate agent (where applicable).

This can create a problem where the tax compliance records of any party are not up to scratch, which is yet another weapon that SARS has in its armoury. Transfers of property have been known to be put on hold in cases where any one of the parties has not complied with their tax obligations.

Most property transactions have to be registered at the Deeds Office and this cannot take place without a transfer duty receipt or exemption certificate from SARS. However, registration is not necessary where fixed property is registered in the name of a trust, company or close corporation and there is merely a change in beneficiaries, shareholders or members.

SARS thus requires estate agents who are party to such transactions to complete a declaration (Form TD7). This is necessary because the change of ownership here does not require registration of the transfer in the Deeds Office, since technically the ownership of the property itself has not changed. These transactions are still subject to transfer duty however, and in the past many buyers have managed to avoid paying transfer duty by failing to declare the purchase of these shares to SARS.

The information in this article is courtesy of Steven Jones (“Why Sars wants your income tax number when you buy a property”, MoneywebTax, 30 September 2008).

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