What transfer duty taxes
Transfer duty is a tax on acquiring property — it falls on the person who acquires, not the person who sells. That is why moving a property into a company can attract duty even though it is your own property and no purchase price is paid: for transfer-duty purposes the company is acquiring the property. The charging section is short.
… there shall be levied … a transfer duty (hereinafter referred to as the duty) … on the value of any property … acquired by any person … by way of a transaction or in any other manner …
Two consequences follow. First, the liability sits with the acquiring company, so it is Newco that would normally pay. Second, because duty is triggered by the acquisition, you cannot sidestep it simply by transferring at no value — the duty is calculated on the property’s value, not on what (if anything) was paid. That is where the section 42 exemption matters.
The current scale (and what it would cost)
The duty is charged on a sliding scale set each year. With effect from 1 April 2025 (unchanged for the 2026/27 year) it runs from 0% on the first R1.21 million of value to 13% on value above R13.31 million. On Thabo’s R6 million property, the duty without the section 42 exemption is R437 356 (R106 784 plus 11% of the value above R2 994 800) — which is the whole reason the exemption is worth securing.
| Tax | Applies to | Rate (2026) |
|---|---|---|
| Income tax — trust | Taxable income retained in an ordinary trust | 45% (flat) |
| Income tax — company | Newco's rental / trading profit | 27% |
| Income tax — individual | Income vested in a resident beneficiary | Up to 45% (sliding scale) |
| CGT — trust | Gain retained in an ordinary trust (80% inclusion) | 36% effective |
| CGT — company | Gain in a company (80% inclusion) | 21.6% effective |
| CGT — individual / special trust | Gain in a person / special trust (40% inclusion, on the sliding scale) | Up to 18% effective |
| Dividends tax | Company pays a dividend upward | 20% |
| Donations tax | Gifts / s 7C deemed donations (25% over R30m cumulative) | 20% |
| Estate duty | Dutiable estate on death (25% over R30m) | 20% |
| Securities transfer tax | Transfer of shares — e.g. shares in a trading company that is not a residential property company. Exempt under s 8(1)(n) of the STT Act where the unlisted security is an acquisition of “property” subject to transfer duty (or a supply subject to VAT) — as it is when Newco is a residential property company and the trust buys its shares | 0.25% |
| VAT | Standard-rated supplies (e.g. commercial property by a vendor) | 15% |
| Official rate of interest | s 7C deemed donation on low/no-interest loans (repo + 1%; 7.75% 1 Dec 2025–31 May 2026; 8% 1 Jun–30 Sep 2026) | 8.25% (from 1 Oct 2026) |
| Transfer duty | Acquiring property — sliding scale | 0% to R1.21m … 13% above R13.31m |
Last reviewed: 1 April 2025. Rates are South African and time-sensitive. The R150 000 / R20 000 donations-tax exemptions are the figures SARS currently publishes; they come from clause 9 of the 2026 Draft Rates Bill (deemed effective 1 March 2026) and we have not located the promulgated amendment, so treat them as SARS-published rather than quoted statute. The official rate of interest changes with the repo rate, so a section 7C figure must follow the rate for each period. A special trust is taxed on the individual sliding scale (CGT up to 18%), not the flat 45% / 36% that applies to an ordinary trust; the 18% figure is a maximum effective rate, not a flat rate on every gain. Confirm every figure against the current SARS material before acting.
That is not just practice — it is in the Act. The deeds registry is prohibited from recording the transfer unless duty has been paid, and the only way to register without paying is to lodge the no-duty / exemption certificate.
12. Registration of acquisition of property prohibited where duty not paid. (1) No registration officer shall make any record in his deeds registry of an acquisition of property unless there has been produced to him proof, other than a receipt for a deposit on account of duty— (a) that any duty payable under this Act or any other law has been paid in respect of the acquisition in question; … (2) The provisions of subsection (1) shall not apply with reference to an acquisition of property in respect of which there is lodged with the registration officer a certificate issued in terms of section 11(3)(a) or 9(15)(c).
Note — The Act calls this provision section 12 (its heading is “Registration of acquisition of property prohibited where duty not paid”); section 14 is a different provision (declarations to the Commissioner). Section 12(2) is the carve-out the exemption relies on: registration may proceed where a certificate under section 11(3)(a) or 9(15)(c) is lodged.
The two section 42 exemption routes
There is a common misconception that the section 42 transfer-duty exemption is a single rule tied to the VAT Act. It is not. A section 42 transfer of fixed property can be exempt by two distinct routes, and which one applies turns on whether the parties are VAT vendors. Using the wrong route — or filing an affidavit for the wrong route — is a common and expensive error.
Route 1 — the section 9(1)(l)(i) corporate-acquisition exemption
Where transfer duty (not VAT) is the tax on the transfer — the usual position for a residential rental property, because letting a dwelling is an exempt supply — the exemption is section 9(1)(l)(i) of the Transfer Duty Act. This is a blanket exemption for the acquisition of property by a company as part of a section 42 asset-for-share transaction. It does not depend on the VAT Act at all, and it contains no vendor or residential test: a person registered for VAT for some other activity can still use it for a dwelling let on an exempt basis. The company’s public officer simply files a sworn affidavit that the acquisition complies with section 9(1)(l). This is the route for the classic Nkosi residential structure.
(1) No duty shall be payable in respect of the acquisition of property by— … (l) any company in terms of— (i) an asset-for-share transaction as defined in section 42 of the Income Tax Act, 1962 (Act 58 of 1962); … where the public officer of that company has made a sworn affidavit or solemn declaration that such acquisition of property complies with the provisions of this paragraph;
Note — On its own words this is a blanket exemption for “any company” acquiring property under a section 42 asset-for-share transaction — there is no “residential” or “non-VAT-vendor” test in the text. It is the relevant relief precisely where the transaction falls outside the VAT Act (so transfer duty, not VAT, is the tax in point). The closing words impose the public officer’s sworn affidavit requirement.
Route 2 — the VAT-vendor route: section 9(15A) + VAT Act section 8(25)
The second route applies only where the supplier and the recipient are VAT vendors and section 8(25) of the VAT Act deems them one and the same person for the supply — for a section 42 supply, that means the fixed property is supplied as part of an enterprise sold as a going concern under a written agreement, or is supplied under a written agreement that the supplier will lease it back from the recipient immediately after the supply (the sale-and-leaseback alternative in s 8(25)(iii)). On that footing section 9(15A) of the Transfer Duty Act grants the exemption. It is specific to a section 42 acquisition that satisfies section 8(25); it is not a general matching exemption for every corporate transaction.
(15A) No duty shall be payable in respect of the acquisition of any property under an asset-for-share transaction as contemplated in section 42 of the Income Tax Act, 1962 (Act 58 of 1962), where— (a) the supplier and recipient of that property are deemed to be one and the same person in terms of section 8(25) of the Value-Added Tax Act, 1991; and (b) the public officer of the company as contemplated in section 101 of the Income Tax Act, 1962, has made a sworn affidavit or solemn declaration that such acquisition of property complies with the provisions of paragraph (a).
Note — Note the two express conditions: the s 8(25) VAT-Act deeming and the public officer’s sworn affidavit. Unlike s 9(1)(l)(i), this route only works where the parties are vendors caught by section 8(25).
The mechanism that does the work in para (a) is section 8(25) of the VAT Act. Where goods or services are supplied by one vendor to another, section 8(25) deems the two vendors to be one and the same person for that supply, provided the relevant Income Tax Act roll-over provision (section 42, 44, 45 or 47) is complied with. For a section 42 supply this only applies where the enterprise (or a separately operable part of it) is disposed of as a going concern under a written agreement, or where fixed property is supplied under a written sale-and-leaseback. A residential rental fails those conditions — residential letting is exempt, so there is no enterprise supplied as a going concern and no vendor supply to lease back — which is why section 9(15A) does not fit a residential rental.
The exemption applies where fixed property is acquired as a result of an asset-for-share transaction as contemplated in section 42 of the Income Tax Act. The exemption is limited to immovable property where the supplier and the recipient of that property are deemed to be one and the same person under section 8(25) of the VAT Act. The public officer of the company is required to submit a sworn affidavit or solemn declaration that the provisions of section 8(25) of the VAT Act and section 42 of the Income Tax Act apply …
Note — This route is the VAT-vendor route only (going concern, or fixed property with a written leaseback). It is not the route for a residential rental moved into Newco — that is Route 1, section 9(1)(l)(i). The affidavit the public officer files must track the route actually claimed.
Why residential letting sits outside VAT is itself statutory: under section 12(c) of the VAT Act, the letting of a dwelling under a lease is an exempt supply, so it is not a taxable activity. Because that supply is exempt, the dwelling is not part of anyone’s “enterprise” for VAT — even where the owner happens to be registered as a vendor for some other activity — which is exactly why the section 8(25) route (Route 2) cannot apply to a residential transfer, and Route 1 (s 9(1)(l)(i)) is the correct one.
Worked example: Thabo claims the exemption
The residential-property-company rule
Once the property sits inside Newco, there is one more trap to know about. You might think the duty could be sidestepped on a future sale by selling the shares in Newco rather than the property. The Transfer Duty Act closes that door: buying the shares in a company that mainly holds residential property is taxed as if you bought the property itself. Importantly, this is statutory — it sits in the definition of “property” in section 1 of the Transfer Duty Act, not merely in SARS practice. The SARS Transfer Duty Guide explains it.
“property” means land in the Republic and any fixtures thereon, and includes— (a) any real right in land but excluding any right under a mortgage bond or a lease of property other than a lease referred to in paragraph (c); … (d) a share (other than a share contemplated in paragraph (g)) or member’s interest in a residential property company;
Note — This is the operative hook. By defining “property” to include a share or member’s interest in a residential property company, the Act makes a sale of those shares an acquisition of “property” — so the same charging section (s 2) that taxes buying the building also taxes buying the shares in the company that holds it.
“residential property company” means any company, other than a REIT as defined in section 1 of the Income Tax Act, 1962 (Act No. 58 of 1962), that holds property that constitutes— (a) residential property; or (b) a contingent right contemplated in paragraph (f) of the definition of “property”, and where the fair value of that property or contingent right comprises more than 50 per cent of the aggregate fair market value of all the assets, as defined in paragraph 1 of the Eighth Schedule to the Income Tax Act, 1962, (other than financial instruments as defined in section 1 of that Act or any coin made mainly from gold or platinum), held by that company on the date of acquisition of an interest in that company; [The Guide explains:] The implication is that the supply of any shares or other interests in an entity falling within the scope of this definition is regarded as the supply of “property” which is subject to transfer duty.
Note — The first sentence is the statutory definition (it is in the section 1 definition of “property” in the Transfer Duty Act); the bracketed sentence is the Guide’s own explanation of its effect, not statutory text.
Read the denominator carefully: the more-than-50% comparison is made against all the company’s assets excluding financial instruments and gold or platinum coins, on the date the interest is acquired. “Residential property” has its own statutory meaning (a dwelling, holiday home, apartment or residentially zoned land, with carve-outs for larger letting complexes and a vendor’s enterprise property), indirect holdings through subsidiaries can count, and a REIT is excluded. A share-block share is carved out of this limb only because share-block shares are separately included as “property” under paragraph (g) — not because they escape duty.
How the duty is worked out on shares. Duty is charged on the fair value of the residential property the shares represent: SARS’s Transfer Duty Guide (para 2.4.6) says no account is taken of any lease on the property or of any loan or debt relating to it, so a bond does not reduce the taxable value. Where only some of the shares are acquired, section 2(5) applies: calculate the duty on the whole property first, then take the fraction acquired (Guide para 7.3.2 and Example 18). That is not the same as applying the sliding scale afresh to the fraction’s value, and it means a partial acquisition does not get a fresh zero-rate band.
The practical effect for a family structure: when the trust later acquires Newco’s shares, or a third party one day buys them, transfer duty is in play on the share transaction itself if Newco is a residential property company — on the Nkosi facts about R437 356 on the R6 million property, bond ignored. And where it is, STT is not charged as well: section 8(1)(n) of the Securities Transfer Tax Act exempts an unlisted security whose acquisition is subject to transfer duty, so the trust’s purchase of Newco’s shares is a transfer-duty event, not an STT event. Budget for the duty and check whether an exemption is available before assuming a share sale is duty-free. For the duty payable on an ordinary property purchase, see our transfer duty guide for buyers.
Frequently asked questions
In principle yes — transfer duty is a tax on acquiring property, so the company acquiring it is liable on the value acquired even where no money changes hands. On a R6 million property the duty is R437 356 on the current scale. But a section 42 asset-for-share transfer can be exempt, so the duty is usually avoided where the conditions are met and the correct affidavit is filed.
Section 9(1)(l)(i) of the Transfer Duty Act exempts the acquisition of property by any company under a section 42 asset-for-share transaction, on the public officer’s sworn affidavit. Its words contain no VAT-vendor or residential test: it is simply the exemption that applies where transfer duty (rather than VAT) is the tax on the transfer — the usual case for a residential rental property moved into Newco, because letting a dwelling is an exempt supply.
There are two distinct routes. Where transfer duty (not VAT) is the tax on the transfer — the usual residential case — the exemption is the section 9(1)(l)(i) corporate-acquisition exemption, needing only section 42 compliance and the public officer’s affidavit. Where the supply is between VAT vendors deemed one person under section 8(25) of the VAT Act — an enterprise sold as a going concern, or fixed property supplied under a written sale-and-leaseback — the route is section 9(15A). Section 9(15A) is specific to a section 42 acquisition meeting section 8(25); it is not a general matching exemption. The affidavit must track the route actually claimed.
A company (other than a REIT) where residential property (or a contingent right to it) makes up more than 50% of the aggregate fair market value of all its assets — excluding financial instruments and gold or platinum coins from that denominator — measured on the date an interest in the company is acquired. The concept is statutory — it sits in the section 1 definition of “property” in the Transfer Duty Act — and exists to stop people avoiding duty by selling the shares in a property-owning company instead of the property itself.
Yes, if it is a residential property company. The Act treats the acquisition of shares (or any interest) in such a company as the acquisition of “property”, so the share sale is taxed as though you bought the underlying residential property. This is statutory anti-avoidance, not SARS practice — buying the shares no longer escapes the duty that buying the building would attract. Duty is calculated on the property’s fair value (bonds are ignored), a partial share acquisition is taxed proportionately under section 2(5), and STT is not charged as well — section 8(1)(n) of the STT Act exempts an unlisted security whose acquisition is subject to transfer duty. See holding property through a company.