The Process of Transferring Property Without Paying Tax
The process of transferring property can be daunting and overwhelming, especially when it comes to taxes. However, with the right knowledge and guidance, it can be a simple and stress-free process. That’s why I wanted to share with you some insights on how to transfer a property without paying tax.
The Importance of Having a Place to Call Home
I understand the importance of having a place to call home, and the emotional attachment that comes with it. It’s not just a physical structure, but a place where you create memories and build your life. That’s why I want to help you navigate this process smoothly and with ease, so that you can continue to build a happy life in your new home.
The Proposed Legislation in the 2009 Taxation Laws Amendments Bill
The proposed legislation in the 2009 Taxation Laws Amendments Bill offers relief to individuals who want to transfer their domestic residence out of a company or close corporation into their own name. This will enable them to receive capital gains tax roll-over relief and transfer duty and secondary tax (STC) exemption until 31 December 2012.
Qualifying for Amnesty
To qualify for this amnesty, all of the shares or members interest in the entity must be held by the person residing in the property or that person’s spouse during the specified period, and the residence must be used exclusively for domestic purposes. The transfer must take place between 1 January 2010 and 31 December 2012, and the entity (company or close corporation) must be wound up after the transfer.
Important Considerations
It’s important to note that trusts that distribute domestic residence will not qualify for any relief. However, the transfer will be free from Capital Gains Tax (CGT), Secondary Tax on Companies (dividends tax) and transfer duty. The transferee will also be able to benefit from the “primary residence exclusion” from CGT if the residence is subsequently sold for a profit.
Although transferring a growth asset into the hands of a natural person usually leads to an increase estate duty liability, it must be remembered that the only entities that qualify for the relief are those in which the natural persons held all the shares or members interest. Therefore the transaction will be tax-neutral from the point of view of estate duty.
When It May Not Be Advisable to Transfer Property
If you’re considering transferring your residential property from your company or close corporation into your private name, there are some situations in which it may not be advisable. For example, if the proposed new owner is running a high-risk profile, has signed sureties for business debts or for any third party’s debts, or if the value of the property is likely to exceed R5 million in the next five years.
It’s important to take into account the cover value of life policies when considering whether the proposed new owner’s private assets (personal estate) will exceed R7 million once the house has been transferred into their own name. If you stand to inherit more than R7 million Rand in the foreseeable future, or if you plan to acquire a property for R7m or more and register it in your private name, it may not be the best option.
Other Costs Associated with the Transfer of Immovable Property
Clients who decide to take advantage of this opportunity will still be responsible for other costs associated with the transfer of immovable property, such as conveyancers’ fees and bond cancellation/re-registration costs. It’s also important to weigh up the costs of ongoing accounting, tax, and CIPC fees of the trusts/companies/close corporations owning the properties.
I hope this information has been helpful and has given you some insight into the process of transferring property without paying tax. Remember, it’s always best to seek professional advice before making any decisions. If you have any questions or concerns, please don’t hesitate to contact us. We’re here to help you make the best decision for you and your family.
