1715. Abolition of stamp duty
March 2009 – Issue 115
The ambit of the Stamp Duties Act which was introduced in 1968 has been steadily reduced over the last few years. Stamp duty only remains payable on leases of immovable property for periods longer than five years. Stamp duty that was previously payable on unlisted marketable securities in terms of the Stamp Duties Act is now payable in terms of the Securities Transfer Tax Act.
The Minister of Finance announced in his budget review in February this year that he is considering the outright repeal of the remaining aspects of stamp duty in order to simplify administration and compliance. He did, however, express concern that the repeal of the Stamp Duties Act may lead to the undermining of transfer duty, and that the South African Revenue Service (SARS) was considering whether transfer duty should be legislatively applied to long-term leases.
The case for the abolition of stamp duty on long-term leases is very strong. Although the stamp duty is payable by the lessor, it is generally recovered from the lessee. The stamp duty is also payable at the time the lease is entered into, which results in a very unwelcome additional cash cost to any new business that commences trading at its new premises. Stamp duty has also become an outdated tax with the introduction of value- added tax (VAT), a more sophisticated consumption tax. Moreover, both stamp duty and VAT are payable on rentals even though there is no rationale for paying both these taxes.
The Revenue Laws Amendment Act, 2008 which was signed into law on 8 January 2009 repeals the Stamp Duties Act and also repeals the remaining stamp duty on immovable property leases longer than five years.
However, lessors should note that stamp duty on property leases will only be abolished from 1 April 2009, and all leases entered into prior to that date will still attract the duty. Therefore, where the lease has been entered into prior to 1 April 2009, stamp duty thereon will remain payable in terms of the Stamp Duties Act, and SARS may continue to enforce the provisions of the Act in respect of these leases even after the Act is repealed.
Edward Nathan Sonnenbergs
Stamp Duties Act No. 77 of 1968
Securities Transfer Tax Act No. 25 of 2007