Buying Property as a Non-Resident
BUYING PROPERTY AS A NON-RESIDENT IN SOUTH AFRICA
INFORMATION TO ASSIST
South Africa is said to have one of the best Deeds registration systems in the world which is highly accurate. All the information to each piece of land including diagrams and owners details are recorded in the Deeds Registry of that region.
Herewith some interesting and useful information which you should read if you are thinking about purchasing property in South Africa:
1. The Transferring attorneys:
In South Africa usually the Seller of the property nominates the conveyancing attorneys who will attend to the registration of the Transfer. A Conveyancer is a qualified attorney who specialises in the transfer of property.
2. Transfer Costs:
Although the Seller chooses the transferring attorneys the costs are usually
paid by the Purchaser to the Sellers Conveyancers. The transfer costs
usually include Transfer Duty, which is an amount payable to the Receiver
of Revenue and is based on a formula calculated on the Purchase Price:
Natural Persons
(a) R0- R500 000.00 (Purchase Price) – No Transfer duty is payable
(b) R500 000.00 – R1 000 000.00 – 5% of the purchase price is payable as transfer duty
(c) Above R1 000 000.00 – 8% of the purchase price is payable as transfer duty
Non-natural Persons
Transfer duty is paid at a flat rate of 8% of the purchase price.
Besides transfer duty there are also the conveyancer’s fees for
attending to the registration of the transfer which are payable by you.
These fees are usually calculated with reference to a recommended
tariff, which is based on the Purchase Price of the property.
3. Borrowing money in South Africa to Purchase Property
Usually Non-residents cannot obtain a mortgage bond of more than 50% of the Purchase price of the property. The remaining Purchase price must be deposited into South Africa from a foreign bank.
Should you be interested in obtaining a mortgage bond to facilitate finance of the property in South Africa you will need to provide the bank with the following documentation:
1. Proof of Identification (i.e. passport)
2. Proof of income
3. Proof of your residential address
In order to make the monthly loan repayments you will need to open a banking account with a South African Financial institution. You will again need to provide the bank with the above list of documentation and once the account has been opened it will be necessary for you to deposit foreign funds into the account. It is also a good idea to register for Internet banking with that bank so that you can access your funds on the Internet when you are abroad which will be very useful.
4. Bringing Foreign Funds into South Africa to Facilitate transfer of the immoveable property
You can transfer funds from abroad into any nominated bank account in South Africa. If you are paying a deposit on the property this would either be paid into the Estate Agents trust account or the Conveyancing attorneys trust account depending on the wording of the agreement of sale. This can be done with the balance of the purchase price as well. The Estate Agent or Conveyancing Attorneys then invest the monies on your behalf in an interest bearing account. Once the transfer is registered the interest which accrued from the invested funds would then be credited to your account.
5. Signature of the Transfer Documents
The transfer documentation can either be signed by you here in South Africa or alternatively the documents can be sent to you abroad. It is advisable that if you are not going to be able to sign the documents in South Africa that you give someone here in South Africa Power of attorney to sign the necessary transfer documents on your behalf. If the documents are sent to you overseas for signature there are certain requirements that have to be complied with. You will need to sign these documents before the South African Embassy in that country or go to a Notary Public which can be quite costly.
6. Income Tax in South Africa and How it effects non-residents purchasing property in South Africa
Non-residents are liable for income tax accruing from a South African source only. For example if you lease out the property the income received from the rental will be subject to South African income tax.
If a non-resident who has not permanently immigrated to South Africa is seemed to spend more than a certain length of time within the country they could be deemed to be considered as a resident for the purpose of income tax.
7. Capital Gains Tax
When you as a non-resident sell the immoveable property you will be liable to pay capital gains tax.
Should the property be registered in your name as an individual 25% of the profit made on the selling of the property will be taxed on the individual’s marginal income tax rate. The maximum marginal rate is currently 40%, which translates to a maximum flat rate payable of 10% of the capital gain.
8. Selling the property
Once the property has been registered in your name as a non-resident the title deed will be endorsed “Non-resident” and this will assist you (should you sell the property one day) in transferring the profit (less any capital gains payable/ settlement of a bond etc) made by you out of South Africa.
In accordance with the South African Exchange Control regulations once
the property has been sold by you moneys from a foreign source, together
with any profit made by you may be transferred to your banking account
overseas by the transferring attorneys.
We hope that this information will be useful to you and should you require any further assistance please do not hesitate to contact us!
Disclaimer: The material contained herein is purely for information purposes and does not constitute legal advice and we therefore accept no responsibility for loss or damage which may be incurred from relying on information supplied herein.
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Copyright C&A Friedlander 2006.
