If the buyer pays commission, does it reduce transfer duty?
Where an estate agent is the effective cause of a sale of immovable property the seller will be liable for the commission payable.
In some rare cases the purchaser can instruct an agent to find a property which fits specified criteria and the purchaser would then be liable for the payment of the estate agent’s commission. The parties can also contractually agree that the purchaser will be liable for the payment of the commission.
Often, purchasers want to amend the contract to state that the purchaser will be liable for payment of the agent’s commission as they think that it reduces the purchase price and accordingly the amount on which transfer duty is calculated.
The SARS Transfer Duty Guide sets out the position as follows:
The following payments must be added to the consideration payable under section 6(1):
- Commission or fees [section 6(1)(a)]: The total amount of commission or fees paid or payable by the person who acquired the property in respect of that acquisition must be included for purposes of calculating transfer duty.
The bottom line is that the purchaser will pay the same transfer duty amount whether the contract stipulates that the seller or the purchaser pays the commission.
This article has been reproduced here with the kind permission of MC van der Berg Inc