Buyers Guide
Introduction The South African government allows foreigners (individuals who reside outside the countries borders) to purchase property in South Africa, subject to Reserve Bank approval, either as: Natural persons Legal entity (C.C / Company / Trust) (Legal entity may take up to 30 days to be registered) Foreigners / Nonresidents may utilize local mortgage bond finance on the basis of 50% cash being brought into the country via Reserve bank approval. South Africa has a sophisticated, dependable banking system with healthy competition amongst the individual banks on products and rates. Funds are secure and the transfer of funds to registered banks are guaranteed. Once funds are received and guarantees are called for by conveyancing attorney these maybe released to the attorney pending registration of transfer (ownership) Ownership can be partial or wholly-owned by foreigners, with the following property ownership: Freehold most common (Residential dwellings) Sectional title (Multi unit dwellings) Leasehold Share block Extra costs included, are over and above the purchase price: Transfs charges a er duty government tax. Transfer fees Conveyancer's fees. Bond registration fees bank nd legal fees for registering a bond. Normally these fees are approximately 7% of the purchase price. Except in cases where the seller is registered as a VAT (Value Added Tax) vendor, trading in property, VAT is applicable, included in the final selling price, and payable by the seller.
CAPITAL GAINS TAX South African residents are liable for the payment of Capital Gains Tax ("CGT") on the disposal of any asset, subject to certain limited exceptions. Non-residents, however, are only liable to pay CGT on the disposal of the following: * Immovable property situated in South Africa, including any right or interest in immovable property (this also includes an interest of at least 20% in a company where 80% or more of the value of the net assets of the company is attributable, directly or indirectly, to immovable property in South Africa); * Assets of a permanent establishment of a non-resident through which trade is carried on in South Africa. CGT is payable in the year in which the asset is disposed of and is calculated by adding 25% of the capital gain, or profit, to the individuals income for that year and taxing that income at the individuals marginal rate of income tax. The maximum marginal income tax rate for individuals in South Africa is presently 40% (reached at taxable income levels above R270 000). The capital gain is calculated and disclosed in the individuals' income tax return for the year in which it is sold. Thus, if a non-resident disposes of an immovable property in any year of assessment and is not already registered as a South African taxpayer, he or she will have to register as such and submit an income tax return reflecting the calculation of the capital gain and will be liable for the payment of CGT on that gain. CGT became effective on 1 October 2001 and is thus payable only from that date. The amount of a capital gain is calculated either by deducting the value of the property as at 1 October 2001 (together with the costs of acquiring and improving the property) from the proceeds on disposal of the property or by apportioning the amount of time the property was owned between the period before 1 October 2001 and the period after that date. South African residents do not pay CGT on the first R1-million of profit made on the disposal of their primary residence. However, non-residents will not qualify for this exemption if their primary residence is not in South Africa. And finally, in terms of extra fees, taxes and charges to be borne by the investor, these include transfer duty which is levied by the government and is a variable rate tax of between 1 and 8% for private ownership or 10% for purchase via a legal entity such as a trust. Transfer costs of between 1 and 2%, mortgage costs, estate agents fees which are normally included in the price and lawyers fees which should be negotiated before agreeing their services are also all payable by the property investor.
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Buyers Guide
