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Buying and selling South African property investments: tax implications for non-residents explained

By April 5, 2023October 5th, 2023FinGlobal

Buying and selling South African property investments: tax implications for non-residents explained

April 5, 2023


Now that travel restrictions have been lifted worldwide, international buyers are once again taking advantage of the superb investment opportunities in South Africa’s property market. This is mainly due to the country’s appealing lifestyle, diverse range of properties, and favourable pricing compared to other markets with strong currencies. Furthermore, it is possible to purchase property in South Africa without actually stepping foot onto that property, which makes it an even more attractive investment option for non-residents. Many expats (now non-residents) are leveraging their insider knowledge to purchase property back home in South Africa from overseas while taking full advantage of favourable exchange rates.

With this in mind, let’s take a look at what non-residents need to know about buying and selling property in sunny South Africa.

Are there any restrictions on buying property in South Africa as a non-resident?

Unlike other countries, there are no restrictions when it comes to the value or type of property non-residents and foreign investors are allowed to purchase in South Africa. Non-residents can even buy property remotely without having even visited the country.

Property development is booming in South Africa, so there is no shortage of investment potential. Furthermore, South Africa is well known for having a world-class deed registration system, which makes property ownership simple, safe and secure. Coming out of the pandemic, international buyers are once again showing interest in the South African property market. This is down to the fact that South Africa has incredible weather, much to offer from a lifestyle and travel perspective, and it offers value for money. Additionally, hybrid working arrangements and the growing digital nomad lifestyle make it possible for people to live and work in South Africa flexibly.

Buying property in South Africa as a non-resident: the facts

Non-residents can buy property in their own name or through a foreign company. Such an entity must be registered in South Africa as an external company and, it must appoint a public officer who is a South African resident if that company’s shares are held by a non-resident.

Non-residents can sell their properties in South Africa, but the profits could be subject to capital gains tax (CGT). Non-residents must therefore ensure they are registered with the South African Revenue Service (SARS) in order to sell their real estate. South Africa does not charge a flat rate for CGT like many other jurisdictions, so it is important that non-residents understand how SARS taxes capital gains.

Non-residents do not require a visa to purchase real estate in South Africa. This is because South Africa does not offer any visa-by-investment schemes. However, should a non-resident wish to live in the property purchased, they would need to be granted either a business, work or retirement visa to do so.

Do non-residents pay transfer and estate duty when purchasing property?

Foreign purchasers are subject to the same fees, costs and regulations as resident buyers, such as transfer fees and the like. They are also legally bound by the sale contract, which they can sign in their own country before a Notary Public or at a South African embassy, depending on their country’s legal requirements.

Non-resident withholding tax

While there are no restrictions on buying or selling property as a non-resident, it is important to note that there are tax implications on such transactions involving non-residents. As such, if you are a non-resident involved in the purchase or sale of a property, this fact must be disclosed so that it can be noted on the property deed.

When non-residents sell property, section 35A of the Income Tax Act requires the purchaser of the property to withhold a percentage of the sale amount if the gross sale price is R2 million or more, and the seller is a non-resident.

How much is withholding tax for non-residents selling property?

The percentage of the sale proceeds withheld will depend on the legal entity that owns the property.

  • If a natural person is the registered owner, 7.5% must be withheld
  • If a company is the registered owner, 10% must be withheld
  • If a trust is the registered owner, 15% must be withheld.

The funds withheld must be paid to SARS within 14 days if the purchaser is a resident or within 28 days if the purchaser is a non-tax resident. The purchaser may be held liable if they fail to withhold the amount and it is determined that it was likely they had a reasonable suspicion that the seller was a non-resident.

There are several scenarios in which the non-resident withholding tax can be reduced or waived:

  1. If the seller provides alternative security in respect of the tax obligation due from the sale of immovable property, they can request a directive from SARS to exempt them from e section 35A withholding tax.
  2. If the seller is not liable for tax on the sale of the property, they may also apply for a directive to be exempted from the withholding tax.
  3. The seller can also apply for a directive if the tax liability at the time of the sale is less than the amount that would be withheld under section 35A.

A non-resident natural person can be exempted from the withholding tax if they can show SARS that they were physically present in South Africa for more than 183 days during the 12 months prior to the interest payment, and if the tax obligation is linked to a property belonging to a registered non-resident taxpayer.

It is important to note that the tax amount withheld in terms of section 35A is not fixed and can be reduced or waived, under the right circumstances. The withholding tax is only enforced to ensure that tax obligations on the sale of the property, such as capital gains tax (CGT), are duly fulfilled.

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