All contracts to acquire immovable property must be in writing and signed by both Buyer and Seller. Estate Agents will draw up this contract which is called an Offer to Purchase. Once signed, this constitutes a valid and legally binding contract from which neither party can withdraw without incurring legal consequences, save for certain instances where the agreement is subject to certain conditions which are either fulfilled/not fulfilled.
A non-resident may only borrow up to a maximum of the amount he invests into the purchase of the property, which translates into a 50% loan. There is a registration cost levied on Bonds which is dependant upon the value
The registration of a property transaction is handled by a specially qualified legal practitioner known as a Conveyancer. It is customary for the Seller to appoint the Conveyancer and the Purchaser to pay the costs. The Conveyancer prepares the transfer documentation that, after signature by the Purchaser and Seller, is lodged together with the cancellation of any existing mortgage bonds and new mortgage bonds to be registered in a regionally located Deeds Registry. The deeds are subject to an examination process whereafter they are made available for registration. On date of registration of transfer, all existing mortgage bonds by the Purchaser in favour of the bank granting financial assistance. The Purchaser is recorded as the new owner of the property and the purchase price is paid to the Seller.
The Purchaser is responsible for the payment of these fees unless purchasing new property director from a developer whereby the developer is VAT registered. Transfer Duty is payable to the Receiver of Revenue.
Commission is payable where an Estate Agent is the effective cause for concluding a sale of the property. It is customary that the Seller is responsible for this fee.
All funds introduced from outside South Africa to acquire fixed property within South Africa may be repatriated, together with any profit on resale of the property, provided the Title Deed of the property has been endorsed “non-resident”. The profit on resale may also be repatriated, provided the relevant securities have been endorsed “non-resident”.
CGT became effective on 1 October 2001 and South African residents are liable for the payment of Capital Gains Tax (CGT) on the disposal of any asset for that date, subject to certain limited exceptions. Non-residents are liable to pay CGT on the disposal of the following:
- Immovable property situated in SA, including any right or interest in immovable property.
- Assets of a permanent establishment of a non-resident through which trade is carried on in SA.
- With individuals, 33.3% of the Gain is taxable in their hands for the tax year in which it is disposed. The first R2 million Gain is exempt from CGT if the property is the primary residence of the individual. This rebate does not apply to non-residents.
- With Juristic persons (Companies, Close Corporations), 66.6% of the Gain is taxable in the hands of that Juristic person for the tax year in which it is disposed.
- With Trusts, 66.6% of the Gain is taxable in the hands of the Trust for the tax year in which it is disposed.