Asked by the Customer on 03-08-2016 19:16:39
Question posted in the Property Law category relating to Western Cape
Question posted in the Property Law category relating to Western Cape
Hi
Can one buy a property below market value?
If not what is the lowest one can pay for a property?
Can one buy a property below market value?
If not what is the lowest one can pay for a property?
Further information relating to Question:
Market value approx 1.2million
Want to purchase for 650k
Message from the Attorney
Posted by Att. Patrick on 03-08-2016 20:34:56
Hi there and thank you for your question,
One can purchase a property (I'm assuming that you're talking about an immovable property, i.e. a house or a flat) for any price that you want. It could literally be R1. Anything!
The only thing that you need to keep in mind is that when it comes to paying transfer duty (i.e. the tax on the property that SARS charges), SARS has the right to calculate the transfer duty based on the "market value" of the property, and not on what you paid for it.
What happens when SARS thinks that you're buying a property for less than the market value is they ask the conveyancing attorney to provide them with 2 or 3 estimates from estate agents at what the market value is. They also look at the municipal value of the property. They will then determine what they think the market value is, and they will then calculate the transfer duty based on that.
This means that you would then pay R1 for the property, but still R85k (for example) for transfer duty.
In your example, R650k as the purchase price, and approximately R14k (calcualted on the R1.2m market value) transfer duty to SARS.
If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
One can purchase a property (I'm assuming that you're talking about an immovable property, i.e. a house or a flat) for any price that you want. It could literally be R1. Anything!
The only thing that you need to keep in mind is that when it comes to paying transfer duty (i.e. the tax on the property that SARS charges), SARS has the right to calculate the transfer duty based on the "market value" of the property, and not on what you paid for it.
What happens when SARS thinks that you're buying a property for less than the market value is they ask the conveyancing attorney to provide them with 2 or 3 estimates from estate agents at what the market value is. They also look at the municipal value of the property. They will then determine what they think the market value is, and they will then calculate the transfer duty based on that.
This means that you would then pay R1 for the property, but still R85k (for example) for transfer duty.
In your example, R650k as the purchase price, and approximately R14k (calcualted on the R1.2m market value) transfer duty to SARS.
If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
Message from the Customer
Thanks for that
So there will be no tax donation payable to sars?
So there will be no tax donation payable to sars?
Message from the Attorney
Posted by Att. Patrick on 04-08-2016 08:08:59
Hi there,
Yes, If the property is not disposed of at fair market value, there may be donations tax payable at a rate of 20% on the difference between the fair market value of the property and the selling price to your son at the date of disposal. It only really applies where the parties are linked. e.g. related to each other - because why would you want to "donate" something to an un-related person!
The legislation provides that, where you dispose of a property and the consideration is in the view of the commissioner of the South African Revenue Service (Sars) not adequate, you will be deemed to have disposed of the property under a donation.
This is not a given though, and SARS has the ability to say yes or no. The other 2 taxes above are a given!
Att. Patrick
Yes, If the property is not disposed of at fair market value, there may be donations tax payable at a rate of 20% on the difference between the fair market value of the property and the selling price to your son at the date of disposal. It only really applies where the parties are linked. e.g. related to each other - because why would you want to "donate" something to an un-related person!
The legislation provides that, where you dispose of a property and the consideration is in the view of the commissioner of the South African Revenue Service (Sars) not adequate, you will be deemed to have disposed of the property under a donation.
This is not a given though, and SARS has the ability to say yes or no. The other 2 taxes above are a given!
Att. Patrick
Message from the Attorney
Posted by Att. Patrick on 04-08-2016 08:13:49
You should also remember that each person has an annual exemption for donations tax (i.e. they can donate up to R100,000 each year without paying donations tax) and the donations tax payable on the sale of the property is payable within the same month that the property is transferred!
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