If you are planning to buy a property, make sure your tax affairs are in order - and make sure you have an exit route from the deal if any other party is not up to date with their taxes, or tries to avoid paying the correct amount of transfer duty.
Central to the issue is the fact that there is often a “chain” of buyers and sellers in a property transaction, all depending on one another to fulfil certain conditions in their sale agreements We are all familiar, for example, with an Offer to Purchase being subject to the buyer being approved for a home loan, or the buyer being able to sell their own property within a certain period.
However, as the saying goes, a chain is only as strong as its weakest link, and both buyers and sellers need to protect themselves as far as possible should any of the links fail.
In this regard it is worth remembering that the Financial Intelligence Centre (FIC) is not the only government body that keeps close tabs on property sales. The SA Revenue Service (SARS), which was allocated an extra R7,5bn in funding in last year’s Budget to help it enhance tax compliance and recover outstanding debt, has already collected R44,5bn more tax this year than in 2024, and is well equipped to identify any attempted tax dodges when it comes to property transactions.
It is not unheard of for buyers to try to avoid paying transfer duty, for example, by offering to pay the seller part of the purchase price in cash “under the table”, while making a written Offer to Purchase at a price below the transfer duty threshold (and below the property’s actual value).
Alternatively, someone might make an offer to buy a home at a price that is way out of keeping with their declared earnings. And while neither of these moves is likely to get past SARS these days, the sale is likely to be stopped until the case has been investigated. That would take time and could cause a severe and costly disruption for the other participants in a property chain.
What is more, SARS might well then decide to take a long look at the tax affairs of all the participants in the chain, and would most likely be entitled to seize the proceeds of a sale in any instance where the property seller was in tax default. The knock-on effect of such an action could be even more significant for those further down the line.
Consequently, it is not only vital to ensure that your own tax affairs are in order before you enter into any property sale agreement, but also to ensure that you are able to get out of the contract without prejudice should any other party in a chain transaction encounter a tax problem.
