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 would come to roughly R437,000 — which is the whole reason the exemption is worth securing.
| Tax | Applies to | Rate (2026) |
|---|---|---|
| Income tax — trust | 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) | 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. Newco shares to the trust) | 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 7% + 1%) | 8% (from 1 Jun 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; 2026 Budget measures (donations-tax exemption increases, resident-spouse limitation) are subject to Parliament's legislative process. A special trust is taxed on the individual sliding scale (CGT 18%), not the flat 45% / 36% that applies to an ordinary trust. Confirm every figure against the current SARS material before acting.
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 non-VAT-vendor route: section 9(1)(l)(i)
Where the transferor is not a VAT vendor — the usual position for an individual who owns a residential rental property in his own name — 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. 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.
Route 2 — the both-VAT-vendors route: section 9(15A) + VAT Act section 8(25)
The second route applies only where both the supplier and the recipient are VAT vendors and the fixed property is supplied as part of an enterprise sold as a going concern. There, section 8(25) of the VAT Act deems the two parties to be one and the same person, and section 9(15A) of the Transfer Duty Act grants the exemption on that footing.
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 / going-concern route only. It is not the route for a residential rental moved into Newco by an individual who is not a VAT vendor — that is Route 1, section 9(1)(l)(i). The affidavit the public officer files must track the route actually claimed.
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.
“residential property company” means any company, other than a REIT …, 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 … held by that company … [The Guide explains:] 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.
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 can be in play on the share transaction itself if Newco is a residential property company — separate from the securities transfer tax that also attaches to a share transfer. Budget for the duty and check whether a roll-over 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 would run to roughly R437,000 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 a company acquiring property from a person who is not a VAT vendor, where the acquisition forms part of a section 42 asset-for-share transaction. It is the route for a residential rental property moved into Newco. The company’s public officer files a sworn affidavit confirming the acquisition complies with section 9(1)(l).
There are two distinct routes. If the transferor is not a VAT vendor (a residential rental is the usual case), the exemption is section 9(1)(l)(i) — a blanket exemption needing only section 42 compliance and the public officer’s affidavit. If both parties are VAT vendors selling an enterprise as a going concern, the route is instead section 9(15A) read with section 8(25) of the VAT Act. The affidavit must track the route actually claimed.
A company (other than a REIT) where more than 50% of the aggregate fair value of its assets is residential property (or a contingent right to such property). 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. See holding property through a company.