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Extend transfer duty exemptions to donations tax

Publishing Date : 03 December, 2018


The recently published Transfer Duty Amendment Bill 2018 proposes to exempt eligible beneficiaries that receive immoveable property donations through programs such as the National Housing Appeal and RADP to be exempt from payment of duty.

Though in practice the beneficiaries have not been requested to pay the duty, this is a good move that will protect the beneficiaries from committing tax evasion while they are not aware that they have been evading tax. The eligible beneficiaries who usually receive such donations are the less privileged who due to their economic status are unable to acquire or build such property for themselves. Therefore imposing such a tax on them might seem like an unfair move by the legislature.

Though this move is highly appreciated, it should be noted that Transfer Duty is not the only tax that is triggered by the donation of property to the kind of individuals or beneficiaries stated above. Donations Tax (also known as Capital Transfer Tax (CTT)) is also applicable to such property and based on the type of immoveable property that are normally donated to these beneficiaries, they can be liable to pay 2% to 5% of the value of the donation received.

 Though it may be argued that in practice BURS does not enforce the tax, it is advisable to also ensure that the exemption is explicitly stated and in writing. This will avoid situations where the beneficiaries may lose such property because of unpaid taxes and interest.
It has been decided in the courts of law (Lord Halsbury LC) that “If the person sought to be taxed comes within the letter of the law, he must be taxed however great the hardship may appear”.

Therefore based on this and the ever growing pressure on revenue authorities to ensure domestic resource mobilisation is maximised, it is advisable to extend exemption of tax for such beneficiaries to CTT. Furthermore the donors of such immoveable property should also be exempt from Capital Gains Tax (CGT) as an incentive for them to continue making the donations. It appears unfair to tax someone for their philanthropic gesture.

Tumelo Rannau is Practising Tax Consultant, writes on his own capacity



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