In recent years there has been an increase in South Africans living and working abroad who are buying properties back in South Africa. Whether they’re doing so with the plan of returning home at some point in the future or they’re simply looking for a good deal, the local property market is booming. If investing in property is something you’re interested in, you might find yourself wondering: can you still buy property in South Africa after tax emigration? The answer is ‘yes’. Unlike other countries, there is no prohibition on non-residents buying property in South Africa which means that even if you complete tax emigration, you’re still welcome to become a property owner even if you no longer live on home soil.

Let’s take a quick look at what you’ll need to know about buying and owning property in South Africa once you’ve ceased tax residency and become a non-resident.

 

Property in South Africa

What is tax emigration from South Africa?

Tax emigration is the process by which you inform the South African Revenue Service that you no longer meet the statutory requirements of tax residency (i.e: the ordinarily resident test or the physical presence test) and that their records should be updated to reflect your change in status from tax resident to non-resident.

 

What happens when you undertake tax emigration from South Africa?

• You switch from resident to non-resident for tax purposes, which means that SARS can only tax you on income with a South African source.
• You are no longer expected to pay expat tax – income tax in South Africa on employment income earned abroad.
• You become liable to pay Capital Gains Tax – an exit charge that SARS calculates on your worldwide assets that you are deemed to have sold at market value the day before you ceased tax residency.

 

Can South African expats still buy property in SA even if they’re non-resident?

As mentioned above, there is nothing that prevents foreigners and non-residents from owning property in South Africa. With one of the most comprehensive property registration systems in the world, non-residents can buy and sell property in South Africa and they’re even able to repatriate the original foreign capital used to make the initial purchase, plus any profit from the sale of their property less tax.

 

What is required for a non-resident/foreigner when purchasing property?

Buying property in South Africa from another country has its advantages – the exchange rate is more than likely in your favour, and interest rates are exceptionally low, all of which indicates the potential in immovable property for making a solid investment.

As a non-resident buyer, you are obliged to disclose this fact to the estate agent handling the property purchase, and your non-resident status must be recorded on the property title deed.  This is important for the purposes of calculating withholding tax when you eventually sell the property in the future.

There are a number of other factors that come into play for non-residents when purchasing property in South Africa from overseas. Here’s the lowdown:

• You’re not going to have access to the same choice in financing as residents would, because exchange control rules are tight about how much credit non-residents can access locally to fund their property purchases.
• You’re unlikely to get home loan assistance for more than half of the property purchase price, which means that you’ll need to fund the remainder in cash  – this can come from overseas or within South Africa, and you’ll be able to repatriate such funds after the property has been sold by you.
• If you are not physically present in South Africa to sign the bond or transfer documents as the property purchaser, you’ll need to have these officiated at either a Notary Public, who (depending on the country of signature) or you may have to have the documents Apostilled; or signed at a South African embassy.

 

There are some additional costs to be aware of when it comes to buying property as a non-resident:

• Transfer duty where the property value is higher than R1 000 000 applies to residents and non-residents. However,  off-plan purchases (property bought from developers where there is usually no transfer fee) are usually subject to VAT (value added tax) which is generally  included in the sale price.
• You will also need to foot the usual costs of transfer, as well as ensure that you are registered with the South African Revenue Service in order to facilitate any future Capital Gains Tax obligation upon selling the property. If you receive any rental income on this property, you’ll be obliged to pay tax on this South African sourced income.

 

Things to bear in mind when it comes time to sell your immovable property in South Africa:

Non-residents are subject to a withholding tax of a certain percentageon the proceeds of the sale of a property of more than R2 000 000. This tax is payable until SARS provides clearance from any amount to be paid to you, the seller or to your agent.

You can reduce your withholdings tax obligation by requesting a tax directive from SARS before the transfer, in which case the amount deemed by SARS (if any) will be withheld. Here’s what else you need to know when it comes time to sell your South African property as a non-resident

 

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