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Property Transfers Between Spouses Now Tax-Free

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Jonathan Hore

It is rare to find instances where tax laws give back taxes to taxpayers. If you are in for such a boon, I encourage you to use the chance while it is still available. I want to elaborate how most immovable property transfers between spouses are now tax-free, especially considering the recent amendments to the Transfer Duty Act and the Capital Transfer Tax Act. In this article, words importing the masculine shall be deemed to include the feminine.
No transfer duty

Transfer duty is a tax payable to BURS whenever immovable property changes hands and is levied on the beneficiary or acquirer of the property. Citizens pay this tax at 5% while non-citizens part with 30%. However, transfers of property between spouses have always been free of transfer duty, whether such transfers occur during the lifetime of both spouses or after the passing on of the spouses. From 1st March 2020, amendments removed the need for such spouses to be married in community of property, lessening the tax burden between spouses. Further, effective 1st March 2020, divorcees do not have to worry about transfer duty, whether or not they were married in community of property. Therefore, where desirable, one can transfer property to their spouse while they are alive, without tax.

Donations tax

The Capital Transfer Tax Act levies donations and inheritance tax on donation and inheritance of property, among other assets. The tax is levied at a maximum tax rate of 5% on properties whose value exceeds P500 000, if payable by individuals. The tax is paid by the beneficiary, as in the case of transfer duty. Let me state that effective 1st March 2020, the same exemptions in the Transfer Duty Act are now applicable to the Capital Transfer Tax Act. This essentially means that donations or transfers of immovable property to a living spouse of the donor are not taxable. Further, a surviving spouse of a late spouse is also free from the tax on transfer of such property.

No CGT on houses
Before you get too excited, let me state that there is income tax on donations of immovable properties and there is no exemption specific to spouses. The tax is what we call Capital Gains Tax (CGT). However, the Income Tax Act provides that no CGT shall be levied on an individual in instances where he disposes a principal private residence (PPR) after owning it for at least five years. PPR is a term that is found in the Income Tax Act but no definition of the same is provided anywhere else. However, it is internationally accepted that a PPR is a person’s main or sole house. If such a person has one house, that house becomes his sole house and therefore qualifies as a PPR. If the person has more than one house, then the person’s main house will be his PPR.

This basically means that a spouse can donate or transfer a property to the other spouse if it is a PPR which would have been owned for at least five years, tax-free. There is no requirement that the individual should reinvest the proceeds from the disposal in another PPR.

Conclusion
You now know that there is no transfer duty, Capital Transfer Tax and CGT on transfers of certain immovable properties among spouses, as described. So, you may as well spoil your loving spouse with that property before you check out of this life! Should you fail to effect such transfers during your lifetime, there still is not tax even on inheritance of the property by a surviving spouse. The only challenge then is that the transfers have to go through either the Master of the High Court or your family ‘court,’ which may require that some procedures be followed.
Well folks, I hope that was insightful. As Yours Truly says goodbye, remember to pay to Caesar what belongs to Ceasar. If you want to join our WhatsApp group, send me a text on the cell number below.

This article is of a general nature and is not meant to address particular matters of any person. Tax consulting is advised if decisions are to be made. Jonathan Hore is a Managing Tax Consultant at Aupracon Tax Specialists and feedback may be relayed to jhore@aupracontax.co.bw or 71815836.

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