What is a “transaction” for transfer duty purposes?

According to reports, given current low interest rates, there have been an uptick in property transactions. Therefore, it is worthwhile considering the potential impact of any transfer duty taxes to be imposed on such transactions. The Transfer Duty Act imposes a transfer duty on the value of any property acquired by any person by way of a transaction, or in any other manner, or on the value by which any property is enhanced by the renunciation of an interest in or restriction upon the use or disposal of that property. For this reason the underlying concept of acquisition and important definitions in establishing whether there is a liability for transfer duty must be considered. The following concepts are key elements: “acquisition”, “date of acquisition”, “fair value”, “property”, “residential property”, “residential property company” and “transaction”. The last of the concepts, being a “transaction”, requires special attention.

What constitutes a “transaction”

A “transaction” includes not only an acquisition by way of purchase, donation, exchange, or any other modes of acquisition, but also any act whereby the value of the property is enhanced through the renunciation of any other person’s interest in, or restriction upon, the use of or disposal of the property.

Furthermore included in this definition are transactions involving the acquisition or renunciation of registrable personal servitudes. A positive personal servitude is where the owner of the land burdened by the servitude must allow the holder of the servitude to exercise some right or benefit over the land in question. Examples include rights of usufruct, habitation, usus, right of way, right to collect firewood, power line servitudes, etc.

A negative personal servitude prohibits the landowner from exercising a right that is accepted as inherent in the ownership of the property. In other words, these types of servitudes amount to registrable restraints or veto rights, which prohibit the owner of the land from doing something which would usually be permissible. Examples include:

  • prohibiting the owner from subdividing the land without the necessary consent;
  • restricting the height of buildings or prohibiting more than one building to be erected on the land; and
  • prohibiting the transfer of the land without the consent from the Home Owners’ Association etc.

A negative personal servitude can be created in the deed of transfer if it can be enforced by some person who is mentioned in the servitude and that person has accepted the right. This is often applied in the case of the creation of restraints enforceable by Home Owners’ Associations. However, no separate creation or registration event is necessary where the restraint is created by statute such as, for example, by Municipal Ordinance.

Property transactors should therefore be vigilant of any potential transfer duty costs in respect of their transactions as it could lead to an unintended transaction cost when not properly managed.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.



Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.



Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.



Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.