The recent announcement by the South African Revenue Service (SARS) that it has implemented a flat rate of stamp duty is making waves in the property industry because it effectively doubles the duty paid on property leases of five years or less.

There are concerns that the profitability of property-owning companies and tenants will be harmed by the move. Commentators are also up in arms because SARS has implemented the policy before gazetting it.

Commercial property association Sapoa CEO Brian Kirchmann said on Tuesday that he was "disappointed" at the move, as the property body had expected to consult with SARS and raise concerns before the changes were implemented.

"Why rush it (stamp duty amendments) through, firstly? And, secondly, Sapoa was promised a workshop with SARS on the whole issue," he said.

SARS is bringing in a flat rate of 50c per R100 or part thereof, irrespective of the lease period .

Kirchmann said a rate of 25c per R100 had previously been paid on leases of five years or less. On leases of five to 10 years, a rate of 40c per R100 had been payable, while a rate of 50c per R100 was paid on leases of 10-20 years. In the past a rate of 70c per R100 was paid on leases of 20 years or more.

"The way in which this increase has been handled is not in the interest of public-private relationships. We urgently seek an appointment with government to rectify what we believe is not in the interests of the property industry, with special emphasis on small business and previously disadvantaged individuals who have now entered the commercial property area."

Jonathan Smith, a director of property strategists Courtwell Consulting, said the property sector had anticipated increases on stamp duty on fixed-property leases , but had expected longer leases and leases with higher rentals to be targeted.

"Stamp duty on leases under five years is effectively doubled. Whereas tenants signing longerterm leases will now benefit, smaller businesses and residential tenants will be negatively affected," said Smith.

He said the implementation of the increase before gazetting was an "anomaly in legislative procedure and should be challenged".

SARS did not explain why it had implemented the amendments without gazetting them, but said on Tuesday they would come into operation retrospectively from January 1 this year.

Business Day