GUIDE TO BUYING PROPERTY AS A
Nothing prohibits a non-resident from
buying or selling immovable property in South Africa. In the event
of a non-resident selling his property, he will be permitted to
repatriate his original capital plus profit at any time. At the
time of repatriation of funds, the fact that the funds were imported
into the Republic, will have to be proved. Non-residents are
furthermore permitted to obtain mortgage bond financing up to a
maximum of 50% of the purchase price of the immovable property.
Immovable property is mostly registered
in the name of the purchaser as an individual. There may be
specific reasons for taking transfer in the name of a specific
entity and for a brief overview of these, kindly consult our
PROPERTY VEHICLES AND TAX
You will have to finalise your choice of
property vehicle for purchasing a property prior to signing any
Deed of Sale, as no changes can be made at a later date without the
possibility of penalties being imposed and resultant delays in the
WHO IS A NON-RESIDENT?
A non-resident is a person who is not a
resident of South Africa.
A natural person can be a resident due
to one of the following reasons:
If his/her permanent home to which
he/she will normally return, is in South Africa.
If he/she complies with the physical
presence test. This test consists of three requirements: i.e.
the person must be physically present in South Africa for a
91 days in aggregate during the
year of assessment under consideration; and
91 days in aggregate during each
of the five years of assessment preceding the year of
assessment under consideration; and
915 days in aggregate during the
five years of assessment.
A natural person has to meet all three
requirements before that person will satisfy the physical presence
test and as a result will be classified as a resident. The year of
assessment starts on March 01 and ends on the last day of February
in the following year.
In terms of the physical presence test,
a person who is not ordinarily a resident in South Africa becomes a
South African resident with effect from the first day of the sixth
year of assessment if he/she is physically present in South Africa
for the periods as set out above. The purpose of the presence is
irrelevant. A day is therefore counted even if the presence is, for
example, for the purposes of a holiday, visiting friends or a
Legal entities like Companies, Close
Trusts, are considered resident in SA if the entity was
incorporated, established or formed in SA, or if the effective place
of management is in SA.
In certain instances the SA government
may deem a legal entity to be exclusively a resident of another
country in terms of an agreement concluded with that other country
with the purpose of avoidance of double taxation.
The South African property registration
system is of a very high standard and ensures that ownership after
registration is secure. Transfer of properties is handled by a
specialist attorney known as a conveyancer. Such conveyancer is
appointed by the Seller, but open to negotiation.
The conveyancer will require both
purchaser and seller to sign certain documentation, pay transfer
duties and local government taxes, and draft final documents for
registration purposes. The above, together with mortgage bonds to
be cancelled and new mortgage bonds to be registered, will then be
lodged in the Deeds Office, who will subject all documents to an
intense examination process whereafter they will be transferred.
This whole process ensures that the new owner’s title deed of
ownership is valid and that any liabilities in respect of the
property incurred by the previous owner, remain with him.
The cost of procuring an electrical
compliance certificate in respect of the property, is customarily
payable by the Seller.
The Purchaser is customarily responsible
for the following cost:
Professional fees of the conveyancer,
calculated in accordance with recommended guidelines of the Law
A pro-rata portion of local
authority rates and taxes, calculated for a maximum of one year
Registration of any new mortage bond
Transfer duty, calculated as
follows, based on the purchase price:
R0 - R600 000:
R600 000 - R1 000 000:
R1 000 000 - R1 500 00
R1 500 000 and above
CAPITAL GAINS TAX (CGT) ON DISPOSAL OF
CGT is not a separate tax, but forms
part of the income tax system and is a tax on capital gains. CGT is
only applicable to the disposal or deemed disposal of an asset on or
after 1 October 2001.
Currently, non-residents are liable to
CGT on the taxable gain made on the disposal of the following
Immovable property situated in South
Africa (e.g. land and buildings);
Any right or interest in immovable
property in South Africa (e.g. long term lease)
Shares in a company where 80% or
more of the market value of its net assets comprises immovable
property in South Africa, and the non-resident holds directly or
indirectly 20% or more of the shares in the company;
Assets of a permanent establishment
(e.g. a branch of a foreign company) situated in South Africa.
A capital gain in respect of the
disposal of an asset during a year of assessment equals an amount by
which the proceeds received or accrued in respect of such disposal
exceeds the original cost of that asset. In the case of natural
persons, only 33,3% of the net capital gain, is included when
calculating the tax payable. For companies, close corporations and
trusts, 66,6% of the net capital gain on the disposal of an asset is
included in taxable income.