Taxes and Fees
Fees
The Conveyancer's fees are prescribed by a tariff and are calculated on a sliding scale based on the purchase price. The Purchaser is usually liable for payment thereof together with VAT thereon.
Information on the Conveyancing Process:
"CONVEYANCING" describes the legal process whereby a person, company, close corporation or trust becomes the registered and lawful owner of fixed property and ensures that such ownership cannot be challenged. It also encompasses the process of the registration of Mortgage Bonds.
A Conveyancer is an attorney who by law is the only person who can register fixed property transfers. This is necessary to ensure the protection of the various interests the parties have in the transaction and to maintain the high standard of land registration.
The first requirement is a valid Agreement of Sale. This is a written agreement which is signed by both the Purchaser and Seller (and by the Seller's spouse in cases where the parties are married in community of property, or account to the laws of a foreign country). A written "Offer to Purchase" signed by a Purchaser and accepted by a Seller also constitutes a binding agreement. An oral contract for the sale of fixed property is invalid.
The Agreement of Sale/Offer to purchase is handed to the appointed Conveyancer, who will draft the necessary documents. Both the Seller and the Purchaser will be required to call at the offices of the Conveyancer to sign the necessary documents. The documents to be signed include the following:
- A Power of Attorney to Pass Transfer
- Declaration in respect of Marital Status, Identity Number and solvency
- Transfer Duty and Value Added Tax (VAT) Declaration
- FICA Documents
- Bond Documents, if a Mortgage Bond is to be registered
BOND REGISTRATION COSTS
Conveyancer's fees are calculated on a sliding scale based on the amount of the bond and are payable by the Purchaser to the Conveyancer who registers the bond.
BOND CANCELLATION COSTS
If the Seller has a bond registered over the property, this must be cancelled on transfer and the Seller is responsible for payment of the Conveyancer's fees for cancellation.
CAPITAL GAINS TAX (CGT)
Capital Gains Tax is a tax payable on the profit a Seller makes when a property is disposed of, and not on the entire value of the property.
The Profit (Capital Gain) is calculated by deducting the base cost of the property from the proceeds on disposal of the property. Disposal includes sale, donation, exchange, vesting the property in the name of a beneficiary of a trust.
The amount of CGT payable depends entirely on the entity that owns the property.
Non-Residents are also liable for the payment of CGT.
Please Note: This very short introduction to Capital Gains Tax does not purport to contain a complete summary of the Capital Gains Tax Provisions.
Income Tax
South Africa follows a residence based income tax system meaning that world wide income earned by a South African resident will be subject to ordinary income tax. Non-Residents are liable for tax on a more limited basis and their liability is dependent on the source of their gross income being a South African source.
Any rental earned by non-residents in respect of South African properties will be subject to income tax and it is the responsibility of the non-resident to register as a South African Tax Payer.
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. Nonresidents, 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 nonresident through which trade is carried on in South Africa.
CGT is payable in the year in which the asset is disposedof and is calculated by adding 25% of the capital gain, or profit, to the individuals income for that year deducting the annual rebate of R12 500 and taxing that income at the individuals marginal rate of income tax. The maximum marginal income tax rate for individuals in South Africa is at present 40% (reached at taxable income levels above R400 000). The capital gain is calculated and disclosed in the individual’s 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.
If If the asset is held by a Trust, the Trust pays CGT on 50% of the gain at 40%, whereas a company or close corporation pays CGT on 50% of the gain at a tax rate of 29%
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.
You may use the 20% calculation if you do not have records of the acquisition of the costs of the property and you do not have a valuation as at October 1, 2001. SARS will deem 20% of your proceeds to be the base cost of the asset. South African residents do not pay CGT on the first R1.5-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.
Withholding tax for non-residents
There is a proposed amendment to the law whereby any person who acquires any interest in South African immovable property from a non-resident must withhold amounts actually paid. ie:
5% if it is a non-resident individual seller
7.5% if the non-resident seller is a Company
10% if the non-resident seller is a Trust