Page 617 - Juta's Indirect Tax

IN 22 (3) TRANSFER DUTY ACT IN 22 (3) There is no restriction or requirement relating to the purpose for which the immovable property is to be used. The
property may therefore be used either to carry on PBAs or to carry on business or trading activities.
Example 8 – Transfer of property from a PBO to any other entity controlled by that PBO
Facts:
Care Bears Community Centre, a PBO, owns the following properties under separate title deeds:
• Improved property in the central business area from where it conducts its activities of caring for homeless and
destitute persons.
• Improved property used to care for terminally-ill persons. Part of the property is let for commercial use.
• A property bequeathed to the centre comprising ten ats from which rental income is derived.
• A vacant stand that the centre intends to develop as an orphanage which is currently being used as a parking facility. For certain practical and administrative reasons, the centre has decided to transfer all the immovable properties into a separate legal entity. For this purpose a company with a share capital of 100 shares was registered as the property- owning company. The company is wholly owned by the centre.
Result:
The transfer of all the above properties from the PBO to the company will qualify for
the exemption from the payment of transfer duty because –
• the centre is a PBO; and
• the properties are transferred to another entity which is controlled by the PBO, being the sole shareholder.
5. Application procedure for transfer duty exemption
An exemption from the payment of transfer duty is not a blanket exemption but an exemption for a speci c transaction. Each transaction is considered on its own merits. A declaration which is available on eFiling www.sarse ling.co.za must be submitted for each acquisition of property for which an exemption is required. No supporting documents are required to be submitted with the submission of the declaration. Supporting documents must, however, be retained and submitted when requested in writing by SARS through eFiling. Supporting documents may include –
• the letter issued by the TEU granting approval to the PBO or statutory body;
• an af davit setting out the activities to be carried out on the property; and
• con rmation that the whole or substantially the whole of the property will be used to carry on one or more PBAs.
6. Application procedure for approval as a public bene t organisation or statutory body
A newly established organisation or an organisation that has previously not applied for approval as a PBO or as a statutory body which requires exemption from the payment of transfer duty for the acquisition of property, must complete the prescribed application form (Form EI 1) available on the SARS website. The application form and relevant supporting documentation must be submitted to the TEU (see Annexure B). A request may be submitted for the application to receive priority attention if there is a transfer duty exemption pending the approval by the TEU of the applicant as a PBO.
The TEU will issue a letter to inform the organisation whether its application for approval as a PBO or statutory body has been approved. It is not a requirement that a PBO or statutory body renew its approval annually. The approval will be sustained as long as the PBO or statutory body continues to comply with all the requirements for approval. In cases of doubt the TEU should be contacted.
The TEU has discretion to approve an organisation as a PBO with retrospective effect if the TEU is satis ed that the organisation during the period before its application complied with the requirements of a ‘PBO’ under section 30.* A PBO approved with retrospective effect may request a refund† of transfer duty if it is proved to the satisfaction of the Commissioner that transfer duty has been paid for an acquisition of property by a person who is, or has become, entitled to an exemption as at the date of the acquisition. Information relating to the application for a refund and the relevant information required in order to process a refund application can be obtained from the SARS website.‡
7. Conclusion
This Note provides general guidelines and considers the broad principles of the legislation. The particular circumstances of each case need to be considered before an exemption from the payment of transfer duty can be approved. The following guides, available on the SARS website, provide comprehensive information and guidance:
• Transfer Duty Guide
• Guide for Transfer Duty via eFiling 2014
• Tax Exemption Guide for Public Bene t Organisations in South Africa
• Basic Guide to Income Tax for Public Bene t Organisations
• VAT 409 – Guide for Fixed Property and Construction
• VAT 414 – Guide for Associations not for Gain and Welfare Organisations
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE Date of 1st issue : 11 March 2004
Date of 2nd issue : 9 December 2008
* Section 30(3B).
† Refunds are dealt with in Chapter 13 of the Tax Administration Act 28 of 2011. ‡ SARS Home > Types of Tax > Transfer Duty > Refunds.
Juta’s IndIrect tax 2016 609