Matambo to scrap transfer duty
Mbongeni Mguni | Wednesday February 19, 2014 16:58
Speculation has whirled around Matambo’s ideas for the duty since he announced planned amendments to the Transfer Duty Act in order “to encourage homeownership, especially by first-time home owners,” in his 2014/15 budget speech.
At present, citizen home buyers are required to pay transfer duty at a rate of five percent of the purchase price, where the property is valued at more than P200,000. Foreigners pay the five percent transfer duty unconditionally.
Matambo is expected to present legislators with amendments to the Transfer Duty Act soon after the National Assembly concludes Committee of Supply deliberations. While finance ministry officials have been tight-lipped on the planned amendments saying these should procedurally be presented to Parliamentarians first, local analysts expect the removal of transfer duty for first time home buyers.
“There has been a lot of dialogue on the barriers to home ownership and the five percent duty has been an issue,” Grant Thornton Botswana partner, Vijay Kalyanaraman told Mmegi Business on Friday.
“The expectation is that the duty for first-time home buyers will be scrapped. The budget has not said so, but that is what we hope.”
Kalyanaraman, who also represents the Botswana Institute of Chartered Accountants at the High Level Consultative Council, cautioned that the amendments would likely involve the zero-rating of the duty. “The amendments will not do away with the mechanism, but rather zero-rate the duty for first time home buyers,” he said. “The requirement to register will still be there because there should be a record to the registrar, but the rate will be zero.”
The Bankers Association of Botswana also believes changes to the Transfer Duty Act point to its removal for first time buyers. The organisation’s CEO, Oabile Mabusa, last week told this publication that the duty’s removal was one of the recent positive developments in the banking sector.
This week, Mmegi Business also established that the plans to scrap the levy for debutant home buyers was discussed at Cabinet level five years ago, led by the ministry of lands and housing.
It is understood, the ministry had originally considered pushing for the removal of VAT on the sale of certain property sales, but was unable to convince the BURS, which pointed out the complexities involved.
“The major problem was that removing VAT from residential property purchases would also mean removing it from all building materials because it would be an unfair advantage to those who buy built units against those who build for themselves,” a lands and housing insider said.
“Ultimately, the removal of transfer duty for first-time buyers is seen as preferable to scrapping of VAT.”
Over the years, the Botswana Housing Corporation (BHC), the country’s biggest developer and retailer of residential property, has been strongly criticised for charging VAT on property sales.
Up until 2006, the Corporation required buyers to pay VAT upfront when buying property, but has since changed to allow them to pay it in instalments. The BHC argues that it pays VAT in purchasing materials for its housing developments.