CAPE TWON: In the recent matter of the Commissioner for the South African Revenue Service v Short and Other the High Court of South Africa (Western Cape Division) had to decide whether transfer duty had been determined correctly.
The taxpayers contended that the acquisition of the property and the right of habitatio were two separate transactions. As a result, the taxpayers contended that, for purposes of calculating the transfer duty liability, a lower amount of transfer duty was payable on the basis that transfer duty is imposed on a sliding scale and that SARS prescribes a special valuation each methodology for a right of habitatio in its handbook. However, this approach requires separate right to acquire the property concerned to be valued separately.
While the taxpayers were successful in the Tax Court, Binns-Ward J found in the appeal court that the transfer duty should be calculated on the total purchase consideration of R4.2 million and not on the individual property rights acquired by the taxpayers. In particular, the appeal court held that it was apparent from the legal agreement that one was dealing with one transaction and not two separate transactions, as contended by the taxpayers.