buying property from foreigners tax implications
17 September 2007
Anyone buying property from a non-South African resident should be aware that they must withhold tax from the proceeds of that sale as of 1 September this year.
According to Godfrey Timber, director and conveyancer for Smith Tabata Buchanan Boyes Attorneys, this important change in legislation came into effect on 1 September 2007.
"Section 35A of the Income Tax Act declares that where the seller of immovable property is a non-resident, the purchaser has an obligation to withhold part of the purchase price from the seller, and pay such withheld portion to the South African Revenue Services (SARS)," says Timber.
Madeleine Schubert of Shepstone & Wylie's tax department explains that where the purchaser is a South African resident, the taxes withheld must be paid to SARS within 14 days. "However, if the purchaser is a non–resident, the taxes must be paid to SARS within 21 days, if the purchaser fails to pay the taxes and should reasonably have known that the seller is a non-resident, he or she will be personally liable to SARS, together with interest and a 10% penalty," she adds.
It is also critical that estate agents and conveyancers, who are entitled to a fee, must notify the purchaser about the seller's residential status. Failure to do so will result in the estate agent or conveyancer being jointly and severally liable for the amount of taxes payable to SARS.
The amount of tax to be withheld is determined as follows:
• 5% of the total amount where the seller is a natural person;
• 7,5% of the total amount where the seller is a company; and
• 10% of the total amount where the seller is a trust.
Johan Troskie, a director in the tax division of Deneys Reitz Attorneys, explains that there is a very useful exemption from the withholding obligation. For the full report click here Property24.com