The Hidden Tax Costs of Buying and Selling Property

Many property owners believe that the purchase price is the most important financial
consideration in a property transaction. In reality, the tax consequences can often have an
equally significant impact on the overall cost of buying or selling property.

Depending on the circumstances, a transaction may involve transfer duty, Value Added Tax
(VAT), Capital Gains Tax (CGT), transfer costs, withholding taxes (WHTs) applicable to non-
resident sellers, or income tax on profits arising from property development or trading
activities.

These taxes are not always obvious at the outset of a transaction. In some cases, decisions
made before signing an Offer to Purchase (OTP) may determine whether a taxpayer pays
substantially more tax than necessary.

For example, purchasing property through a company, trust or as an individual may have
very different tax consequences. Likewise, deciding whether a property will be used as a
primary residence, investment property or development project can influence future tax
liabilities.

Proper planning before the transaction begins can reduce uncertainty, improve cash-flow
planning and minimise unexpected SARS compliance issues.

Understanding these principles enables property professionals and investors to ask the right
questions at the right time.

LDE Property Tax Academy specialises in explaining these complex concepts in practical,
easy-to-understand language supported by real-life examples and current South African tax
legislation.