THE TRANSFER DUTY AMENDMENT ACT, 2019
The amendment came into operation on the 1st of March 2020. The amendment provides for various exemptions that make it easy for citizens to own immovable property.
S. 2 (1) of the TDA as amended provides that transfer duty is payable upon the purchase price or value of any immovable property, whether Freehold; Held from government upon quit rent or other leasehold tenure; Sold or otherwise alienated or transferred.; or Held under a customary land in the form of (i) a registered lease capable of running for 10 years or more, or (ii) a registered grant lease or concession of tribal land.
Transfer duty is thus a tax payable when immovable property is sold or otherwise alienated or transferred. Payment of duty is therefore also payable on tribal land transactions.
WHO IS LIABLE TO PAY TRANSFER DUTY?
S. 2 (2) of the TDA as amended provides that duty is paid by the purchaser; the person becoming entitled in the event of an exchange, donation or transfer through a bequest or succession; every person into whose name the property is to be registered at the Deeds Registry; every lessee who registers a lease capable of running for a period of 50 years; and every person who registers a grant or a concession, including a tribal land lease or concession. This simply means that it is the transferee who is liable to pay transfer duty.
HOW MUCH IS PAYABLE?
S 2 (3) of the Act provides that duty shall be calculated at the rates specified in subsection (4) on the purchase price paid for the property or on the value of the property sold, whichever is greater, or on the value of the property alienated or otherwise transferred. Therefore, one cannot save up on the duty payable by selling the property below its value.
The rates of duty as provided for in S. 2 (4), as amended, are: 5% where the person liable to pay is a citizen of Botswana; 30% where the person liable to pay is a non-citizen; and 5% where the person liable to pay is an entity which is neither a natural person nor a company. For a customary land grant, duty will be calculated on the aggregate rental payable or the value of the immovable property, whichever is greater.
The payment of value added tax (VAT) affects the amount of transfer duty payable. S. 20 (u) provides that where VAT is payable for a transaction whose rate of transfer duty would be 5%, the 5% duty shall be waived for that transaction. Section 20 (v) states that where VAT is payable for a transaction whose rate of duty would be 30%, the transfer duty shall also be waived on that transaction. This shows that payment of VAT will reduce the transfer duty burden. VAT is currently paid at the rate of 14%. Therefore, payment of VAT thus either eliminates transfer duty payable at the rate of 5%, or reduces duty payable at 30% by 14%.
EXEMPTIONS FOR CITIZENS INTRODUCED BY THE 2019 AMENDMENT
Citizens are exempted from the payment of duty on the first P1 000 000 of the purchase price or value in terms of S. 20 (t). This is an increase from P200 000. This means that citizens will not be liable to pay any duty for property valued at P1 000 000. In addition, S. 20 (w) provides for full exemption where a citizen purchases or acquires a residential property or an undeveloped plot for the first time to be used as a home.
The Act also provides for full exemption where an individual transfers property to a company owned 100 per cent by the individual or jointly owned with a spouse in terms of S. 20 (x). The full exemption also applies where the transfer is the reverse of what is in S. 20 (x).
The price or value of the property should not be inflated by listed costs and expenses, such as costs for surveying; engaging auctioneers, estate agents, brokers, or indeed, by the amount of duty to be paid. In Section 5, however, any other amount or value paid or made over to the seller or transferor as part of the consideration must be taken into account.
Section 14 of the TDA, as amended, provides that the Commissioner General (CG) of BURS assesses and charges duty on the basis of the declaration or valuation certificate, whichever is greater. The CG may also request the Registrar of Deeds or the Registrar of Companies to assist in the determination of the correct value of property chargeable to duty under the Act.
S. 15 of the amended Act empowers the CG to cause to be determined a fair market value of the property where it appears to him that: The declared value, price or purchase money in the case of a sale is less than the just and fair value for the property; and The value in the valuation certificate is not acceptable to either the CG or the person liable to pay duty.
If the determined fair market value is in excess by one third of the declared value or the value in the certificate, the determined fair market value shall be applied. If the determined value is less by one third of the declared value, then the declared value or value in the certificate shall be applied in the computation of duty.
WHEN IS TRANSFER DUTY PAYABLE?
In terms of Section 6 of the Act, as amended, duty in respect of every sale, exchange, share transfer or donation shall be payable within 60 days from the date of the assessment of the duty payable. Section 10 (2) provides that unpaid duty will attract interest at the rate of one and a half per cent (1.5%) compounded monthly, but shall not exceed the amount of the unpaid duty.
THE TRANSFER DUTY AMENDMENT ACT, 2019