Donating immovable property

09/04/2024 - By Kelsey Nurse

When donating property, it is important to understand what the transaction entails in terms of costs. Before we discuss the costs and who pays for what, lets first understand what the definition of a donation is.

A donation is any gratuitous, (meaning given free of charge) disposal of property including any gratuitous waiver of renunciation of a right. A transaction cannot be deemed as a donation if the party receiving the donation (the ‘donee’) gives something to the party giving the donation (the ‘doner’) in return. An agreement for a donation must be concluded in writing when it relates to immoveable property.

What fees are involved and who pays for what?
1. Transfer Costs
2. Donation Tax
3. Transfer Duty

1. Transfer Costs
Transfer Costs are payable by the transferee/donee, unless the parties agree otherwise in the Agreement. These costs are determined on the value of the property. Usually, two estate agency valuations of the property together with the Municipal valuation thereof are used to determine the average value.

2. Donation tax
Donation tax is a tax levied at a rate determined by SARS on the value of the property donated. Donation Tax is regulated in accordance with the Income Tax Act. The current rate of donation tax is 20% on the value of the property donated under a value of R30 million. Donations above R30 Million are taxed at 25%. The person who is making the donation (the ‘donor’) is liable to pay donation tax, however where the donor fails to pay the tax levied, both the donor and the donee will be held liable.

There are cases in which payment of donation tax is not applicable/exempt. There are four categories of exemptions, however for the purposes of this article we will only mention the ones applicable in terms of donations for immovable property:

Category 1:
• Donations made to a spouse; or
an approved PBO; or
any sphere of government; or
any donation that is cancelled within 6 months from the date it took effect.

Category 3:
• The first R100 000 of property donated in each year of assessment is exempt from tax.

3. Transfer Duty
Transfer Duty is a tax levied on the value of any property acquired by any person by way of a sales transaction or donation and is paid by the purchaser/donee to SARS. Transfer Duty is not payable in the case of the seller being a Vat vendor. Transfer Duty is not payable on property valued R1.1 million and below.

Should you require assistance in donating immovable property please contact us: stellav@dpvl.co.za