As the receiver of revenue gets more efficient in his quest for optimum tax collection, so the loopholes are being closed. Frances Louw, tax manager for Grant Thornton Kessel Feinstein provides the following information on transfer duties on properties held in a CC or trust. New provisions have been inserted in the draft legislation of the Transfer Duty Act, which will impose transfer duties on property transactions that were previously exempt.

Currently, transfer duty on the acquisition of immovable property is avoided by placing the property in a company or close corporation, and sometimes a trust. When the owner wishes to dispose of the property, he disposes of the shares in the company. The result is that there is no registration of transfer in the Deeds Registry, and no transfer duty is payable as the property remains registered in the name of the company. New provisions have been inserted in the draft legislation of the Transfer Duty Act, which will impose transfer duties on these transactions.

When, immovable property is placed in a trust and the owner is the beneficiary of the trust there is also not duty payable. When the owner wishes to dispose of the property, there is merely a substitution of beneficiaries and there is no registration of transfer of the immovable property. New provisions have been inserted in the draft legislation of the Transfer Duty Act, which will impose transfer duties on the above transactions. The new provisions will come into operation on the date of promulgation of the legislation.

Companies and close corporations

The draft legislation provides that shares held in a residential property company will be deemed to be "property" and therefore the disposal of such shares will attract transfer duty.

A "residential property company" means any company or close corporation where the only asset or more than 50 percent of the assets, on the date of acquisition of an interest in the company, consists of a house, holiday home, apartment or land zoned for residential use. The 50 percent is calculated at fair market value and financial instruments and any currency is excluded from the calculation. Assets and the liabilities in the company are not taken into account.

Trusts

A new definition of "acquired" has been inserted in the draft legislation to make it clear that the acquisition of a contingent right in a trust that holds either a residential property or a share in a residential property company, will be subject to transfer duty.

Business properties

Business properties are excluded from these amendments. VAT vendors and non-VAT registered vendors are dealt with separately. Any fixed property of a vendor, which forms part of his enterprise, is excluded. For non-vendors, any apartment complex, hotel, motel or similar structure consisting of five or more units, which are rented out to five or more persons, is excluded.