VAT or transfer duty — which one?
Moving property requires a separate VAT and transfer-duty analysis, even if income-tax roll-over applies under section 42. Start by establishing the supplier’s VAT status and how the property is used. Then check the ordinary VAT rules, any going-concern zero-rating, section 8(25) of the VAT Act, and the relevant transfer-duty exemption. If the seller is a VAT vendor supplying enterprise property, the sale is on the VAT side — at 15% unless zero-rating or the section 8(25) continuity rule applies. If not — for instance a private seller, or a dwelling used only for ordinary residential letting, which is an exempt supply — the acquisition is on the transfer-duty side, where an exemption may apply. A qualifying transaction may have no immediate VAT or transfer-duty charge.
VAT and transfer duty are generally mutually exclusive: where a supply of fixed property is subject to VAT, the Transfer Duty Act relieves it from duty (section 9(15)), so you do not usually pay both on the same acquisition. Say generally, not never both — the interaction can be more nuanced in edge cases, and the safe step is to establish the VAT status of the seller and the property before assuming which tax applies.
“No duty shall be payable in respect of the acquisition of any property under any transaction which for purposes of the Value-Added Tax Act, 1991, is a taxable supply of goods to the person acquiring such property if— (a) the transferor of the property under such transaction, in a declaration in such form as the Commissioner may prescribe, certifies that value-added tax payable under the said Act has been paid to him in respect of the said supply by the transferee and has been accounted for by him in a relevant return required to be furnished by him under the said Act or will be so accounted for in such return within the time allowed under that Act for the rendering of such return, or where such supply was subject to the said tax at the rate of zero per cent, such information regarding such supply as the Commissioner may require has been furnished to him; (b) any security required by the Commissioner for the payment of such tax has been lodged, if such tax has not yet been paid; and (c) the Commissioner has issued a certificate to the effect that the requirements of this subsection for the granting of the exemption have been met.”
Note — This is the statutory mechanism that keeps the two taxes apart: where a property transaction is a taxable supply for VAT, transfer duty is relieved — subject to the conditions in (a)–(c), principally the Commissioner’s exemption certificate under (c).
Establish the seller’s VAT status first
Before you can price the move, fix two facts: is the seller a registered VAT vendor, and is the property enterprise property (used to make taxable supplies) rather than a dwelling let to tenants as a home? A VAT vendor selling enterprise fixed property makes a taxable supply (15%, unless zero-rating or section 8(25) applies); a non-vendor, or a vendor selling a dwelling used only for exempt residential letting, does not — that acquisition runs on the transfer-duty side, subject to any exemption. Mixed-use property needs its own analysis. Getting this wrong distorts the whole entry-tax budget.
| Tool | Transfer duty | STT (0.25%) | VAT |
|---|---|---|---|
| S 42 Asset-for-share | Exempt where the company acquires property — s 9(1)(l)(i) of Transfer Duty Act. Public-officer declaration required.† Separate s 9(15A) route where both parties are VAT vendors deemed one person under VAT Act s 8(25).¶ | Exempt where security transferred under s 42 — STT Act s 8(1)(a)(i). Public-officer sworn affidavit/declaration required.‡ | Where supplier and recipient are both registered VAT vendors, they are deemed one person under VAT Act s 8(25)§ — but only if supply is of an enterprise (or separately operable part) disposed of as going concern under written agreement, or fixed property supplied with leaseback arrangement. Election out of the VAT deeming available in writing (then s 11(1)(e) zero-rating may apply instead). No VAT on the sale of a dwelling used only for ordinary exempt residential letting; mixed-use or other property businesses need their own VAT check.§ |
| S 43 Substitutive share-for-share | Exempt only where a company acquires property under the s 43 transaction — s 9(1)(l)(iA) of Transfer Duty Act covers an acquisition by a company, not every shareholder in the exchange. Public-officer declaration required.† Shares in most companies are not “property”; a share or member’s interest in a residential property company, and a share in a share block company, are, so check what is being exchanged. | Exempt where security transferred under s 43 — STT Act s 8(1)(a)(iA). Public-officer sworn affidavit/declaration required.‡ | S 8(25) does not list s 43. A share-for-share exchange involves shares (financial services), not a supply of enterprise property — VAT generally not in play. |
| S 44 Amalgamation / merger | Exempt — s 9(1)(l)(iB) of Transfer Duty Act. Public-officer declaration required.† | Exempt where security transferred under s 44 — STT Act s 8(1)(a)(ii). Public-officer sworn affidavit/declaration required.‡ | Where both parties are registered VAT vendors, they are deemed one person under VAT Act s 8(25)§ — s 44 supplies covered without the going-concern/leaseback proviso that applies to ss 42/45. Parties cannot elect out for the ordinary VAT rules on this limb. |
| S 45 Intra-group transfer | Exempt — s 9(1)(l)(ii) of Transfer Duty Act. Public-officer declaration required.† | Exempt where security transferred under s 45 — STT Act s 8(1)(a)(iii). Public-officer sworn affidavit/declaration required.‡ | Where both parties are registered VAT vendors, they are deemed one person under VAT Act s 8(25)§ — but only if supply is of an enterprise (or separately operable part) disposed of as going concern under written agreement, or fixed property supplied with leaseback arrangement. Election out of the VAT deeming available in writing (then s 11(1)(e) zero-rating may apply instead).§ |
| S 46 Unbundling | Check the shares being distributed. Ordinary shares outside the Transfer Duty Act’s definition of “property” do not attract transfer duty. Shares or interests inside that definition (for example shares in a residential property company or a share block company) may do so. S 9(1)(l) gives no general exemption for s 46 unbundlings; any other exemption must be established separately. | Exempt where security transferred under s 46 — STT Act s 8(1)(a)(iv). Public-officer sworn affidavit/declaration required.‡ | S 8(25) does not cover s 46 unbundlings. Ordinary share transactions are generally exempt financial services, but special rules, including those for share block interests, must be checked. |
| S 47 Liquidation distribution | Exempt — s 9(1)(l)(iii) of Transfer Duty Act. Public-officer declaration required.† | Exempt where security transferred under s 47 — STT Act s 8(1)(a)(v). Public-officer sworn affidavit/declaration required.‡ | Where both parties are registered VAT vendors, they are deemed one person under VAT Act s 8(25)§ — s 47 supplies covered without the going-concern/leaseback proviso that applies to ss 42/45. Parties cannot elect out for the ordinary VAT rules on this limb. |
† Transfer Duty Act 40 of 1949, s 9(1)(l) — public officer of acquiring company must file a sworn affidavit or solemn declaration; the exemption is for an acquisition of property by a company under the listed transaction. ¶ Transfer Duty Act s 9(15A) applies only to a s 42 asset-for-share transaction where supplier and recipient are both VAT vendors deemed one person under VAT Act s 8(25); it has its own public-officer declaration and is not a parallel route for the other rows. ‡ STT Act 25 of 2007, s 8(1)(a) — public officer sworn affidavit/solemn declaration required; exemption is for transfers (issues of new shares are outside STT entirely). § VAT Act 89 of 1991, s 8(25) — the deeming, going-concern/leaseback proviso and election-out are described in the Why residential letting is exempt section below; it only operates where supplier and recipient are both registered VAT vendors. An election out of income-tax roll-over (e.g. s 42(8A)) and an election out of the VAT deeming are different decisions. Check the VAT, STT and transfer-duty provisions separately: an income-tax election out does not, by itself, decide whether an exemption under another Act is available (see the election-out note under STT roll-over exemptions below).
Going-concern zero-rating
Where the property is enterprise property and the seller is a vendor, the default is 15% VAT at the standard rate. But if the whole enterprise is sold as a going concern — the business and all the assets necessary to carry it on, including the fixed property — the supply can be zero-rated (VAT at 0%):
“Fixed property which is sold by a vendor will usually attract VAT at the standard rate. However, it is also possible for the fixed property concerned to form part of the supply of a going concern where an entire enterprise and all the necessary assets (including the fixed property) are sold to the purchaser. In such cases, the supply of the whole business, including the fixed property, may qualify as a zero-rated supply. (See Interpretation Note 57 ‘Sale of an Enterprise or Part Thereof as a Going Concern’ which deals with this topic in more detail.)”
The conditions that VAT 409 refers to are set out in SARS Interpretation Note 57. To qualify for zero-rating under section 11(1)(e) of the VAT Act, all six requirements must be met:
“In order for the supply to qualify as being zero-rated in terms of section 11(1)(e), the following requirements must be met: The seller and purchaser must be registered vendors. The supply must consist of an enterprise or part of an enterprise which is capable of separate operation. The parties must agree in writing that the supply is a going concern. The seller and purchaser must, at the conclusion of the agreement, agree in writing that the enterprise will be an income-earning activity on the date of transfer thereof. The assets necessary for carrying on the enterprise must be disposed of to the purchaser. The parties must agree in writing that the consideration for the supply includes VAT at the zero rate.”
Note — This is SARS Interpretation Note 57 (“Sale of an Enterprise or Part Thereof as a Going Concern”, 31 March 2010), the note cross-referenced in VAT 409 para 2.8 above.
Zero-rating is not the same as exemption. A going-concern supply remains a taxable supply charged at a 0% rate, which preserves the parties’ input-tax positions; an exempt supply (like residential letting, below) is outside the VAT net altogether and carries no input-tax entitlement. The zero-rating route is mainly relevant to a commercial or enterprise property, not to the typical family rental.
Why residential letting is exempt — and pays transfer duty
Ordinary letting of a dwelling to tenants as a home is an exempt supply for VAT (section 12(c) of the VAT Act). A property used only for that purpose is therefore generally not part of an enterprise for VAT purposes: no input tax can be claimed on it, and no 15% VAT is charged when it is sold. Instead, the acquisition falls under transfer duty on the sliding scale, unless a transfer-duty exemption applies. A “residential” label alone does not settle the point: commercial accommodation, mixed-use buildings and other property businesses need their own VAT analysis.
This is why the classic family structure — a residential rental like the Nkosi property — runs on the transfer-duty rails, not the VAT rails. The relevant s 42 exemption route for that property is the section 9(1)(l)(i) corporate-acquisition exemption in the Transfer Duty Act (its words contain no vendor test), not the VAT-vendor route under section 9(15A) and section 8(25) of the VAT Act, which operates only where both the supplier and the recipient are registered VAT vendors and the supply meets the s 8(25) going-concern or fixed-property leaseback conditions.
Section 8(25) of the VAT Act is a special continuity rule for corporate reorganisations between registered VAT vendors — the supplier and the recipient must each be a vendor. Where the requirements of s 42, 44, 45 or 47 of the Income Tax Act are complied with, the supplier and recipient are deemed to be one and the same person for that supply. Its extra conditions are targeted, not universal: for s 42 and s 45 supplies the deeming only applies if the supply is of an enterprise (or a separately operable part) disposed of as a going concern under a written agreement — or, alternatively, if fixed property is supplied under a written sale-and-leaseback arrangement. Section 44 and s 47 supplies are covered by the deeming without that going-concern proviso. And qualifying s 42/45 parties can elect in writing for the ordinary VAT rules — including the s 11(1)(e) going-concern zero-rating — to apply instead of the deeming. For a section 42 transaction only, that deeming is also what unlocks the separate transfer-duty exemption in section 9(15A); section 9(15A) does not extend to the other roll-over sections.
“For the purposes of this Act, where any goods or services are supplied by a vendor to another vendor, those vendors must for purposes of that supply or subsequent supplies of those goods or services, be deemed to be one and the same person provided the provisions of section 42, 44, 45 or 47 of the Income Tax Act are complied with: Provided that this subsection shall not apply to a supply contemplated in section 42 or 45 of the Income Tax Act, unless— (i) that supply is of an enterprise or part of an enterprise which is capable of separate operation, where the supplier and recipient have agreed in writing that such enterprise or part, as the case may be, is disposed of as a going concern; … or (iii) the supply is of fixed property and the supplier and the recipient have agreed in writing that, immediately after the supply, the supplier will lease the fixed property from the recipient: Provided further that this subsection shall not apply to a supply as contemplated in section 42 or 45 of the Income Tax Act, where such supplier and recipient have agreed in writing that the provisions of subsection (7) and section 11 (1) (e) of this Act shall apply.”
None of this reaches the classic family rental, for a simpler reason: letting a dwelling is an exempt supply, so the dwelling does not form part of anyone’s VAT enterprise — even where the owner happens to be registered as a vendor for some other activity, this transaction sits outside the VAT net, and s 8(25) has nothing to operate on. Confirm both parties’ VAT registrations, and what the supply actually consists of, before relying on the rule.
Securities transfer tax (0.25%)
The third entry tax bites at the second step — when Newco’s shares move to the trust. Securities transfer tax (STT) is a tax of 0.25% charged on the taxable amount of a security when it is transferred:
“… at the rate of 0,25 per cent of the taxable amount of that security determined in terms of this Act.”
The trigger is a transfer of an existing security. When Newco is first formed and issues new shares — whether to the founder under a section 42 transaction or to the trust on subscription — that is an issue, not a transfer, so no STT arises on formation. STT only becomes relevant once existing shares change hands — and even then it is not automatic. Where the shares are in a residential property company, the trust’s acquisition is subject to transfer duty and s 8(1)(n) exempts it from STT (the two are not charged on the same acquisition).
STT roll-over exemptions and the issue point
Helpfully, transfers made under the Part III corporate roll-over rules are also exempt from STT — so a share move that itself qualifies as a section 42 (or section 45) transaction can escape the 0.25%:
“(1) The tax is not payable in respect of a transfer of a security— (a) if the security is transferred to a person— (i) in terms of an asset-for-share transaction referred to in section 42 of the Income Tax Act; … (ii) in terms of an amalgamation transaction referred to in section 44 of the Income Tax Act; (iii) in terms of an intra-group transaction referred to in section 45 of the Income Tax Act; (iv) in terms of an unbundling transaction referred to in section 46 of the Income Tax Act; (v) in terms of a liquidation distribution referred to in section 47 of the Income Tax Act; … where the public officer of the relevant company has made a sworn affidavit or solemn declaration that the acquisition of that security complies with the provisions of this paragraph;”
Two points on that exemption. First, it is not limited to section 42 — it also covers section 43, section 44 amalgamations, section 45 intra-group transfers, section 46 unbundlings and section 47 liquidation distributions, and the list above is not exhaustive of every STT relief. Second, it applies to a transfer; it is not needed for an issue, because an issue of new shares is not a transfer at all under the Act’s definitions — so subscribing for new Newco shares is outside STT from the start.
A third point matters for the family structure: the roll-over exemption is not the only one. Where the shares being moved are in a residential property company, the acquisition is subject to transfer duty, and the STT Act then stands aside:
“(n) if that security is an unlisted security which in terms of the Transfer Duty Act, 1949 (Act No. 40 of 1949), constitutes a transaction for the acquisition of property that is subject to transfer duty or constitutes a supply of goods that is subject to value-added tax under the Value-Added Tax Act, 1991 (Act No. 89 of 1991);”
Note — there is no separate share-block paragraph in the current Act. The old s 8(1)(o) was deleted by section 77(b) of the Taxation Laws Amendment Act 34 of 2019, and s 8(1)(n) was substituted by section 77(a) of the same Act to read as quoted above. Share-block shares are still relieved, but through s 8(1)(n): the Transfer Duty Act’s definition of “property” expressly includes “a share in a share block company as defined in the Share Blocks Control Act, 1980” (paragraph (g)), just as it includes “a share … or member’s interest in a residential property company” (paragraph (d)). So the transfer of either kind of share is an acquisition of property, and s 8(1)(n) switches off STT where that acquisition bears transfer duty (or, on its second limb, VAT).
So on the Nkosi facts the trust’s acquisition of Newco’s shares is a transfer-duty event (see the transfer-duty guide), not an STT event. Do not budget for both taxes on the same share acquisition.
On the property leg, the parallel transfer-duty relief where transfer duty (not VAT) is the tax on the transfer — typically a residential rental — is the Transfer Duty Act’s own section 42 exemption. It exempts “any company” acquiring property under a section 42 asset-for-share transaction, provided the company’s public officer files a sworn affidavit or solemn declaration:
“(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 — The em-dash ellipses mark genuine omissions — the s 9(1) chapeau lists many exemptions and s 9(1)(l) covers the corporate rules in limbs (i) (s 42 asset-for-share), (iA) (s 43 substitutive share-for-share), (iB) (s 44 amalgamation), (ii) (s 45 intra-group) and (iii) (s 47 liquidation distribution); only the section 42 limb and the common closing public-officer words are kept above. This is the route where transfer duty, not VAT, is the tax in point — s 9(1)(l)(i) itself contains no vendor or residential test; where the parties are VAT vendors deemed one person under VAT Act s 8(25) (going concern, or fixed property with a written leaseback), s 9(15A) is a separate route — but for a s 42 asset-for-share transaction only.
Note — an election out (for example s 42(8A), s 45(6)(g), s 47(6)(b)) changes the income-tax treatment. Its effect on STT and transfer duty must be checked under each Act’s own words, and the answer is not simply “the exemptions fall away”. Section 8(1)(a)(i) of the STT Act exempts a transfer “in terms of an asset-for-share transaction referred to in section 42” — a definitional test — and in BPR 195 (26 June 2015) SARS ruled that the exemption applied to share transfers under an asset-for-share transaction even though the parties had elected under s 42(8A) that the s 42 relief would not apply. Three cautions: a private ruling binds SARS only for its applicant; the transfer-duty exemption in s 9(1)(l)(i) uses similar “as defined in section 42” wording but has no published ruling; and the public officer must still swear that the acquisition complies with the exempting paragraph. If you opt out for base-cost or loss reasons, confirm the entry-tax position for your own transaction before signing.
Where the other roll-over tools fit
Three separate statutes, three separate exemptions, each with its own conditions and paperwork — they are related, but none of them “travels automatically” with the income-tax relief. Transfer duty: s 9(1)(l) exempts property acquired by a company under a s 42 asset-for-share transaction, a s 43 substitutive share-for-share transaction, a s 44 amalgamation, a s 45 intra-group transaction or a s 47 liquidation distribution (public-officer declaration required each time; the s 43 limb will rarely involve fixed property in practice, and it does not exempt every shareholder in a share exchange — only a qualifying acquisition by a company). VAT: s 8(25) deems the parties one person for qualifying s 42, 44, 45 and 47 supplies where both parties are vendors — with the going-concern/leaseback proviso applying to the s 42 and s 45 limbs only, and an election out for those limbs (see above). STT: s 8(1)(a) spans ss 42 to 47, subject to the public officer’s sworn declaration and the Act’s timing requirements. Section 46 is absent from the transfer-duty list (s 9(1)(l) covers ss 42, 43, 44, 45 and 47) and from s 8(25) of the VAT Act, which does not cover unbundlings at all. Ordinary share transactions are generally exempt financial services for VAT, but share block shares are the exception written into the Act: VAT Act s 2(3)(c) takes “a share in the share capital of a share block company” out of the “equity security” definition, and the s 1 definition of “fixed property” puts it back in as fixed property — so a vendor’s supply of such a share is a taxable supply of goods, not an exempt financial service. Do not read that as “unbundlings never attract transfer duty”: the Transfer Duty Act’s definition of “property” includes a share or member’s interest in a residential property company (paragraph (d)) and a share in a share block company (paragraph (g)), so an unbundling of those shares is an acquisition of property that needs its own transfer-duty analysis — neither the s 46 income-tax relief nor the STT exemption creates a transfer-duty exemption. On the STT side, s 8(1)(a)(iv) covers the unbundled shares’ movement. Each spoke guide flags its own entry-tax position: s 44, s 45, s 46, s 47.
Worked example · the Nkosi family
Enacted, not yet in force — section 49 of the Taxation Laws Amendment Act 5 of 2026 (Government Gazette 54448, 1 April 2026) inserts a new STT exemption (s 8(1)(y)) for a transfer of a security to a collective investment scheme portfolio in return for a participatory interest. It takes effect on 1 January 2027, so it is not available for a transfer before that date. It is a separate exemption and does not change the ones discussed above. The same Act’s income-tax changes for collective investment schemes start differently, so read each commencement provision on its own: section 26 (the Part III definition of “company”) applies to years of assessment commencing on or after 1 January 2027, while section 27’s changes to section 42 apply partly to years of assessment commencing on or after 1 January 2026 and partly to transactions entered into on or after 1 January 2027.
Before signing
Roll-over relief and the entry-tax exemptions depend on the exact parties, VAT registrations, the nature of the supply, values, declarations filed and the order of steps. Obtain transaction-specific tax and legal advice before agreements or resolutions are signed — a later correction may not restore an exemption.
Frequently asked questions
It depends on whether the seller is a VAT vendor and how the property is used. A vendor selling enterprise fixed property makes a taxable supply — normally at 15%, unless going-concern zero-rating or the section 8(25) continuity rule applies — and transfer duty is then relieved. A non-vendor seller, or the sale of a dwelling used only for ordinary exempt residential letting, falls under transfer duty instead, subject to any transfer-duty exemption. The two are generally mutually exclusive — usually one, not both — and a qualifying transaction may carry no immediate charge at all.
Where an entire enterprise and all the assets needed to run it (including the fixed property) are sold by one VAT vendor to another as a going concern, the supply can be zero-rated — VAT at 0% instead of 15%. It is still a taxable supply (a 0% rate, not an exemption), which preserves input-tax positions. SARS VAT 409 sets out the conditions.
Ordinary letting of a dwelling to tenants as a home is an exempt supply, so a property used only for that purpose is generally not enterprise property. No input tax can be claimed and no 15% VAT is charged on its sale — instead the sale falls under transfer duty on the sliding scale, unless a transfer-duty exemption applies. The label “residential” does not settle it on its own: commercial accommodation, mixed-use buildings and other property businesses need their own VAT analysis.
STT is a tax of 0.25% of the taxable amount of a security, charged when a security such as a company share is transferred (Securities Transfer Tax Act 25 of 2007). An issue of new shares is not a transfer, so subscribing for newly issued Newco shares does not attract STT — only moving existing shares does.
Not automatically. Moving existing shares is a transfer, so STT of 0.25% is the starting point — but check the exemptions first. Section 8(1)(a) covers transfers under the Part III roll-over rules; section 8(1)(n) exempts an unlisted security whose acquisition is subject to transfer duty (or to VAT), which is exactly the Nkosi case: Newco holding a residential rental is a residential property company, so the trust pays transfer duty on the share acquisition and no STT. A share in a share block company runs through the same paragraph: the Transfer Duty Act treats it as “property”, so its transfer is an acquisition of property and falls inside s 8(1)(n) where transfer duty is payable — there is no longer a separate share-block exemption (the old s 8(1)(o) was deleted in 2019). Do not budget for both taxes on the same acquisition.