Some important Questions & Answers for non-SA residents who wish to purchase or sell immovable property.
· Does purchasing/owning an immovable property give a foreigner residency status?
No, it doesn’t. Purchasers will still require a valid visa, work permit or residence permit to enter the country.
· Can the Offer to Purchase be signed outside of South Africa?
Yes, it can, but it must be signed with wet ink/pen on paper and then forwarded to the seller for acceptance. No electronic signatures are acceptable. This document can then be forwarded via email. If an estate agent/realtor is involved, he/she will assist with this process.
· Can a non-resident obtain mortgage finance?
Mortgage finance can be obtained from SA banks who finance up to 50% of the purchase price. The balance can be funded by foreign currency which must be transferred via a bank or an authorised currency dealer. This information must be disclosed in the sale agreement and realistic timelines set therefor.
· Who will ensure that the property is transferred timeously and correctly into the name of the non-resident purchaser?
As soon as the sale agreement is binding, the process of transferring ownership to the purchaser in the local deeds office is undertaken by a conveyancer whom has been appointed by the seller. This normally takes approximately 3 months.
· Where can the transfer documents be signed in the event that the non-resident leaves the country before signing the relevant documents?
Transfer, and if relevant, bond documentation, can be signed at a South African Embassy or Consulate before an authorised person. In certain countries it can be signed in front of a Notary.
· Are there any transfer taxes and other costs that a non-resident can be liable for?
Foreign buyers are subject to local taxes, including Transfer Duty which is levied on property transactions. Transfer duty is payable on the acquisition of property whether by an individual or a legal entity. However, no transfer duty is payable if VAT is payable. If the seller is a VAT vendor, VAT will be payable either at the standard rate or at the rate of zero percent (0%) depending on the nature of the transfer.
There are also other costs of transfer into the name of the purchaser. The estate agent/realtor can provide the purchaser with this information.
· Will income tax be payable on rental received?
Non-residents can operate a South African bank account. These accounts
are strictly regulated and local rental income must been approved by the bank in terms of their specific requirements.
Rental income which arises in South Africa, received by or accrued to a non-resident will be subject to normal income tax. Expenses such as rates and taxes, bond interest, insurance and repairs may be claimed as deductions against such rental income, subject to certain conditions.
A non-resident realising a profit from the sale of fixed property or any other income, i.e. rentals from a South African source is obliged to register as a non-resident taxpayer in South Africa and to submit a tax return for the relevant tax period declaring the income to SARS and to make payment in accordance with the assessment raised by SARS.
· What is Withholding Tax (WHT) and how does it affect the non-resident on the sale of the property?
Withholding Tax is a duty placed by the South African Revenue Service (SARS) on the purchaser, conveyancer and estate agent, when dealing with a foreign seller, to ensure that a portion of the proceeds of the sale are withheld, and paid to SARS in order to provide the Capital Gains Tax payable before the funds are paid to such foreign seller. This applies only to Foreign Sellers where the value of the property exceeds R2 million. The withholding amount applies to the gross purchase price and is deducted and withheld from the purchase price received from the purchaser.
In instances where this obligation applies, the conveyancer shall withhold the applicable percentage (depending on the nature of the of the seller) of the net sales price and make payment directly to SARS on behalf of the non-resident seller. Non-residents can then if applicable, claim a refund of the excessive tax payment by submitting a tax return during the next tax filing season.
In summary, it is necessary to emphasise that owning property in South Africa is a very special treat when considering its
· affordability if compared to other countries,
· significant capital growth especially in popular residential areas,
· recurring rental income potential and
· a large choice of different property types, i.e. security complexes, coastal residences with magnificent mountain and ocean views, newly built apartments, luxurious single residences, retirement estates, bushveld homes etc etc.
Should you require any further assistance with either purchasing or selling advice, please do not hesitate to call me as I have 40 years’ experience in the South African Real Estate profession.
Pam Snyman 082 8000 867 or 021 881 3311
Chartered Practitioner Real Estate (CPRE); Certified Director at the IoDSA.
(MPhil, Dip Advanced Property Practice, Dip Property Investment & Valuation)
