Legal Matters
Transfer of Immovable Property
In the past, people have, for different reasons, registered their houses in legal entities such as close corporations, companies and trusts rather than in their own names. Circumstances may subsequently compel them to transfer these properties from these entities back into their own names. This transfer inevitably has financial implications, the largest factor being the payment of transfer duties. This article provides a brief summary of how a property registered in the name of a trust can be transferred without transfer duties having to be paid. At present two separate pieces of legislation allow immovable property to be transferred out of a trust without the payment of transfer duties.
1. Schedule B of the Income Tax Act
This piece of legislation makes provision for the transfer of immovable property without the payment of transfer duties, for a limited period of time only, in cases where persons would be adversely affected by the introduction of capital gains tax. It lays down that, if a natural person donated an immovable property to a trust before 5 April 2001 and since that date has used the property as his/her primary residence, either alone or together with his/her spouse, the trust and such donor can enter into an agreement subject to certain conditions, in terms of which the immovable property can be transferred back to the donor. This agreement must be entered into within one year of the entry into effect of the legislation (in other words between 1 October 2001 and 30 September 2002). The property need not be registered in the deeds office before 31 March 2003. If all these conditions are met, the property can be transferred to the donor without the payment of any transfer duties and/or revenue duties.
This piece of legislation makes provision for the transfer of immovable property without the payment of transfer duties, for a limited period of time only, in cases where persons would be adversely affected by the introduction of capital gains tax. It lays down that, if a natural person donated an immovable property to a trust before 5 April 2001 and since that date has used the property as his/her primary residence, either alone or together with his/her spouse, the trust and such donor can enter into an agreement subject to certain conditions, in terms of which the immovable property can be transferred back to the donor. This agreement must be entered into within one year of the entry into effect of the legislation (in other words between 1 October 2001 and 30 September 2002). The property need not be registered in the deeds office before 31 March 2003. If all these conditions are met, the property can be transferred to the donor without the payment of any transfer duties and/or revenue duties.
2. Section 9 (4) of the Act on Transfer Duties
In contrast to the above instance, the concession provided for under this section of the Act is not only for a limited period of time. The section lays down that, if the trustees of a trust decide to register the immovable property of a trust in the name(s) of the beneficiaries, there are certain cases where transfer duties are not payable.. Because of the nature of a trust, the property must be transferred to the principal beneficiaries of the trust. This section further provides that the transfer will only be exempt from transfer duties if the principal beneficiary receiving the property is a "family member", as defined in the Estate Duties Act, of the person who set up the trust. If these requirements are met, the immovable property may be transferred out of a trust into the name of a natural person without the payment of transfer duties.
M.C. van der Berg Attorney, Conveyancer, Notary
In contrast to the above instance, the concession provided for under this section of the Act is not only for a limited period of time. The section lays down that, if the trustees of a trust decide to register the immovable property of a trust in the name(s) of the beneficiaries, there are certain cases where transfer duties are not payable.. Because of the nature of a trust, the property must be transferred to the principal beneficiaries of the trust. This section further provides that the transfer will only be exempt from transfer duties if the principal beneficiary receiving the property is a "family member", as defined in the Estate Duties Act, of the person who set up the trust. If these requirements are met, the immovable property may be transferred out of a trust into the name of a natural person without the payment of transfer duties.
M.C. van der Berg Attorney, Conveyancer, Notary
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