In an answer to the question:
What factors need to be considered in a transaction where a seller sells his home for a purchase price reflected in the agreement of sale in crypto currency or foreign currency?
I.e. the purchase price is 29 BTC or the purchase price is $210,000.00:
- Are there any prohibitions against doing this?
- How do you calculate transfer duty?
- How do you reflect the purchase price in the draft deed?
- What tax implications need to be considered?
Allen West has written the following:
Registrars of Deeds have never raised any material objection to the disclosure of a foreign currency in deeds and over the years many of these deeds have indeed been registered. With increased opportunities for foreign investment in South Africa over recent years, and given the security that our registration system provides the investor, we could in fact see an increase in the number of these “foreign” deeds presented at our Deeds Registries. However, there have always been some additional factors to be considered during the registration process of these transactions.
First of all, before the payment of stamp duty on mortgage bonds was abolished, the amount of stamp duty payable could not be assessed in South African Rand (hereinafter referred to as “ZAR”), without an accurate indication of the relationship, at time of registration, between the foreign currency and the ZAR, i.e. “the exchange rate”. To facilitate the calculation of stamp duty, a practice was introduced whereby the lodging conveyancer would obtain documentary proof of the exchange rate from a recognized financial institution and submit it to the Deeds Registry. From the Registrar’s perspective, the exchange rate certificate should ideally be issued on the day of execution. However, for practical reasons this may not always be possible. Conveyancers have nevertheless always tried to obtain the certificate as close as possible to date of execution.
With the inception of the Deeds Registration Trading Account, Registrars of Deeds used the exchange rate certificate both for calculating stamp duty and to accurately determine the applicable tariff prescribed in the Schedule of Fees of Office. Consequently, and despite the abolition of stamp duty, the exchange rate certificate is still required to this day in respect of every transaction where the registration fee is based on a monetary value disclosed in the deed.
Logic would suggest a practice whereby examiners would raise a note on the deed along the following lines: “Submit certificate of exchange rate to Registrar of Deeds at execution”. In Deeds Registry parlance, this is a so called “B/E” (“before execution”) note. In the case of a mortgage bond, examiners will disclose the foreign currency in the bond endorsement on the title(s). This would be the more logical approach, especially in view of the fact that the parties specified the disclosure of the foreign currency in the deed itself. The examiners would not complete the fees endorsement, however. Instead, they must affix a red sticker in a conspicuous position on the front cover of the deed and write the words “B/E Note” in bold across it. The note itself must remain open right up to execution where the Registrar of Deeds will receive the certificate from the conveyancer. S/he will file the certificate as a supporting document with the deed, calculate the correct registration fee and complete the fees endorsement.
During the data capture process, when electronic “billing” of the conveyancer’s account takes place, the data capturer simply has to follow the fees endorsement in the normal manner. Currently, the Deeds Registration System software (DRS), caters only for ZAR. All monetary figures are entered using only the numeric characters, as the system automatically defaults to the South African currency symbol “R”. The reason for this is simple – all financial statistics compiled from the DRS database would be inaccurate unless they are based on a single currency.
Registrars of Deeds are obliged to calculate registration fees correctly. By employing the practice outlined above, s/he can be assured that everything possible is done to achieve this.
Property Law Consultant