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DRAFT REVENUE LAWS AMENDMENT BILL
 

DRAFT REVENUE LAWS AMENDMENT BILL

As has been speculated for sometime now, Revenue has released the draft Revenue Laws Amendment Bill for public comment and on which a Parliamentary Briefing is currently scheduled for 23 October 2002. In terms of the Draft Bill certain amendments are proposed to the Transfer Duty Act whereby the sale of shares in a Company, the sale of the Beneficial Interest in a Trust and the sale of the Membership Interest in a Close Corporation in certain instances will attract the payment of Transfer Duty.

Currently, Transfer Duty on the acquisition of immovable property can be avoided by registering the property in a Company or a Close Corporation. Persons who hold their immovable property through the vehicle of a Company or Close Corporation can dispose of the Shares or the Membership Interest as the case may be to the person who wishes to acquire the property. As there is no registration of Transfer in the Deeds Registry, no Transfer Duty is payable as the property remains registered in the name of the Company or the Close Corporation. Similarly, there exists a practice of substituting beneficiaries of a property holding trust which also requires no formal registration of transfer of the immovable property. New provisions are, therefore, being inserted in the Transfer Duty Act, 1949, to address these practices.

The amendments to the Transfer Duty Act will include inter alia: -


1.) A new definition to be included in Section 1, being "Residential Property Company". The sale of Shares or the Membership Interest in a Company or Close Corporation which qualifies as a "Residential Property Company" as defined will attract Transfer Duty.

A "Residential Property Company" is a Company or a Close Corporation where the only asset or the majority of the assets in value consist of a residential house. Accordingly the Shares or the Member's Interest of such a Company or a Close Corporation will be deemed to be property as defined and therefore the acquisition thereof will attract Transfer Duty.

In the case of a Trust a new definition of "acquired" is inserted to make it clear that the acquisition of a contingent right in a Trust that holds either a residential property or shares in a "Property Owning Company" will be subject to Transfer Duty.

2.) In such a transaction the Transfer Duty: -
shall within six months of the date of acquisition be payable by the person who has acquired the "Residential Property Company";

and

where such a person fails to pay the duty within the six month period, the Public Officer of the Company and the person from whom the Shares or Member's Interest is acquired shall be jointly and severally liable for such duty;

and

where a person who acquires a contingent right in a trust fails to pay the duty within the period contemplated in subsection (1), the Trust and the Trustees of that Trust shall be jointly and severally liable for such duty.

Should this Draft Bill become law it is important to note that Transfer Duty will only become payable in respect of the acquisition of any Shares or Member's Interest in a "Residential Property Company" or contingent right in a Trust where such acquisition takes place on or after date of promulgation.

We will keep you posted as to further developments herein and should you have any queries herein please do not hesitate to contact us.



 

 

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