Purchase of property in South Africa by Non South Africans
A foreign individual may register property in their own name or choose to register a company with the CIPC that will then own the property. Ownership may be of actual physical property or shares in a company that owns physical property.
South Africa has a world class Deeds registration system. The Deeds office treats all foreign marriages as deemed in community of property. That is, both partners are required signatories in the purchase or sale of fixed property; serving as acknowledgement of the transaction, not as control over the disbursement of proceeds.
Proceeds of Sale may be repatriated after Capital Gains is paid to SARS, which is liable the year of disposal of property. It is the responsibility of the non-resident to register for tax in lieu of Rental Income and Capital Gains. RSA citizens are exempt on the first R1 Million Capital Gain on their primary residence; exemption is not applicable to foreign individuals.
It is best to register with SARS in the year of purchase. Rental Income yearly exemptions are R27000.00 and R42640.00, for persons aged below 65 and above 65 respectively.
Some of the costs include Transfer costs, which the purchaser is responsible for as well as mortgage registration and related fees. Permission to transfer foreign funds into South Africa is required from the Reserve Bank. Local banks may provide up to 50% mortgage bond, subject to SARB approval.
Some local banks may require opening a local bank account for payment of mortgage; however, it is possible to pay from a foreign account to your mortgage bond account.
A property sold for greater than R2million, the purchaser is to withhold 5% if foreigner is a person, 7.5% if a Company and 10% if Trust: To avoid the withholding law, the seller may apply for a Tax directive from SARS as to the exact CGT amount payable on the Sale amount.
Signature of conveyancing documents done outside South Africa need to be done at the designated South African Embassy; or through the use of special power of attorney within South Africa.
Lastly, on the proposed land reforms that were discussed earlier in the year in Parliament which suggest that “reforms will look to limit ownership of productive land (12000 ha limit) and any action to limit foreign ownership will not be retroactive” – Edwin Rode, editor in Chief of Rodes Report.
Mhlaba Property Company is a Boutique Property Management and Transactional Company
K2015168430: Registration 2015/168430/30
26 Peter Place Road, College House, Bryanston - Johannesburg 2060
+27 11 540 0389 || info@mhlaba-property.co.za
