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Transfer property as a going concern in South Africa

Nobody enjoys paying transfer duties! Conveyancing attorneys are thus often approached by property sellers wanting to conduct the transfer as a "going concern".

What is a going concern?

A going concern in the context of conveyancing relates to an operational business or property which, at the time of the transfer of the property from the owner to the buyer, generates an income. For example; the sale of property, subject to an existing lease provided that the Seller leases properties as part its business. Purchasers prefer to buy property as a going concern as they may take over the operation of the business immediately.

Lady holds money and calculator next to property

Financial considerations

Before entering into such a contract; Purchasers and Sellers should assess all financial implications relating to the property and assess whether the business is in fact being sold as a going concern.

A house in an attorrney's hands, representing the care taken. SA flag.

Transfer duty or VAT?

Clients often think that where the Seller and Buyer of a property are both registered for VAT the transaction would qualify as a going concern that no Transfer Duty or VAT would be levied by SARS. This is however not the case. On all sales of property either Transfer Duty or VAT is levied. In terms of Section 9(15) of the Transfer Duty Act transfer duty is not payable if a transaction is taxable supply under the Value Added Tax Act. If the seller is not a VAT vendor then the transaction will be subject to transfer duty unless the property is an exempt supply. When a Business is sold, VAT is levied at the Standard Rate of 15%. Section 11(1)(e) of the Value Added Tax Act 89 of 1991 provides for the sale of a business with VAT levied at the rate of zero percent.

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What is Zero rating for VAT?

A zero rated transaction is one where VAT is applicable but is charged at the rate of 0%. For the transaction to be zero rated certain requirements must be met :
  • Both the Seller and the Buyer must be registered for VAT.
  • If the Buyer is not registered for VAT; the Buyer must have applied to be registered for VAT before signing the Sale Agreement.
  • The Buyer and Seller must agree in writing that the property is sold as a going concern – this is usually set out in the Deed of Sale.
  • The Buyer and Seller must agree in writing that the purchase price is inclusive of VAT at the rate of 0% - this is usually set out in the Deed of Sale.

Property transfer & sale Info

Sellers of property & buyers, speak to a property lawyer before you hire an estate agent!

Conveyancing & property transfer discussion forum

Note that this is a public forum - exercise caution before acting on info and use at own risk. Anybody may ask and answer, and you don't know what their level of expertise is. No information on this website should be acted on without first consulting with a lawyer to test its validity. Do not share private details here.


Commercial Conveyancers in Cape Town presentation by CapeTownLawyer

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Click here to read the SARS note on the "SALE OF AN ENTERPRISE OR PART THEREOF AS A GOING CONCERN.