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"VAT in the conveyancing fees?"

"VAT in the conveyancing fees?"

Author: Mireille Barnard
Date: 2023-03-24

"Look at this bill my conveyancer sent me R80 730. It?s daylight robbery I say! They don't even do anything," your friend yells angrily at you over a cup of coffee. But hold up, before I defend an entire profession let me break down the Costs involved in purchasing a property.

For properties priced at R1.1 million and under the conveyancing bill will only consist of transfer fees. These fees are regulated by the Legal Practice Council and are always payable (yes, I promise your conveyancer does actually do work and maybe next month I will tell you exactly what that entails).

If you tuned in and paid careful attention to our Minister of Finance, Mr Godongwana's budget speech on the 22 February, you would know that the new transfer duty threshold is R1.1 million. Transfer Duty is a wonderful tax levied on the value of the property being purchased. The purchaser pays it to the conveyancer to pay to SARS in order to obtain Transfer Duty clearance. Think of it as an additional price you pay for enjoying your new home. It is calculated on a sliding scale and for a R2 million property you are looking to pay about R41 625.There are times when Transfer Duty isn't payable but VAT on the purchase price is. As a rule of thumb VAT is paid when the seller is a registered VAT vendor and the property is being sold as a going concern (aka it helps the seller make money). VAT is paid as part of the purchase price and the seller usually pays it over to SARS after registration.

VAT and competition between conveyancing firms means that purchasing a new home from a developer comes with few 'extra' costs as the VAT and transfer fees are normally included in the purchase price. Make sure your read your Offer to Purchase in this regard so that you don't get surprised by any hidden costs. For a lucky few Transfer Duty and VAT are avoided all together. Exemption occurs when property is acquired via an inheritance, via a court order in a divorce and via a cancelled transfer. There is also no tax payable when you are married in community of property and automatically become the Co-owner of the property with your spouse.

But don't get caught in a nasty divorce and lose half your assets, let us prepare your Anti-Nuptial Contract as well.