While South Africa’s property market is currently considered a buyer’s market, it makes sense that there has been an uptick in South Africans living and working abroad buying properties back in South Africa. Asking prices are reasonable given economic conditions, the exchange rate is favourable and interest rates remain lower than usual. This all adds up to an ideal recipe for investing in property in South Africa, whether it’s to buy a future retirement home or you simply can’t resist a bargain deal, the local property market is ripe for the picking.
So if building a property portfolio is something that strikes your fancy, you’re probably wondering: can you still buy property in South Africa after tax emigration? The answer is affirmative. South Africa is not one of those countries that places a prohibition on non-residents buying or owning property, which means that even after tax emigration, you’re still entitled to become a property or land owner, even if you no longer call South Africa home.
But what does it mean to cease tax residency and become a non-resident? What do you need to know about buying and owning property in South Africa as a non-resident? Let’s break it down.
Buying and owning property in South Africa as a non-resident
Can I still buy property or a house in South Africa when I become a non-resident for tax purposes?
Unless you are an illegal alien in the Republic, there are no limitations on non-residents that exclude property ownership in South Africa. While there are procedures in place and requirements to meet when the property is purchased through a business entity, as a private non-resident individual you will only need a residence permit if you intend to reside on the property, which is unlikely at this point in time. As a South African living and working abroad, you are allowed to buy property in South Africa. Depending on your risk/credit profile, you could receive between 50% and 80% property finance once you’ve furnished the necessary documentation for a home loan application and undergone the bank credit assessment process.
Tips for non-residents buying property in South Africa
As mentioned above, there is nothing stopping foreigners and non-residents from owning property in South Africa. With one of the most advanced property registration systems in the world, non-residents are able to buy and sell property in South Africa. They can even repatriate the original foreign capital used to make the initial purchase, plus any profit from the sale of their property less tax. Buying property in South Africa from another country has its advantages – the exchange rate is in your favour, and interest rates are still solidly low, all of which point to the promise of a solid investment in immovable property.
However, as a non-resident buyer, you are under a legal obligation to disclose this fact during the purchase of any property and your non-resident status must be noted on the property title deed. This is for the purpose of calculating withholding tax when you eventually sell this property in the future.
There are a number of considerations for non-residents to weigh up when purchasing property in South Africa from overseas. This is the long and short of it:
- You won’t have the same extensive choice in finance as residents would, because exchange control rules restrict a non-resident’s access to credit in respect of funding property purchases.
- It’s unlikely you’ll get home loan assistance for more than half the purchase price, so you’ll need to be prepared to fund the remainder in cash. This can come from overseas or from within South Africa, and you’ll eventually be able to repatriate your money once you’ve sold the property at a later stage.
- If you are not physically present in South Africa to sign the bond or transfer documents as the buyer you must have these officiated at either a Notary Public, (depending on the country of signature) or you may have to have the documents Apostilled; or signed at a South African embassy. The estate agent handling the sale should point you in the right direction.
There are some extra costs to factor in when buying property as a non-resident in South Africa
- Transfer duty is payable where the property value is higher than R1million, this applies equally to residents and non-residents. However, there is usually no transfer duty associated with off-plan purchases (property bought from developers). The only additional cost to look out for here is VAT and this is generally included in the sale price.
- Transfer costs are payable, as the buyer it’s up to you to handle the transfer costs and ensure you are registered with the South African Revenue Service (SARS) so as 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.
What you need to know when it comes time to sell that property in South Africa
- Non-residents will be subject to a withholding tax of a certain percentage on the proceeds of the sale of a property that exceeds R2 million.
- This tax is payable until SARS confirms clearance from any amount to be paid to you, the seller or to your agent.
- It is possible to reduce your withholding tax obligation by requesting a tax directive from SARS before the transfer, in which case the amount (if any) as specified by SARS will be withheld.
FinGlobal: cross-border financial services specialists
Managing cross-border tax compliance and financial transactions in two countries can get complicated. That’s where FinGlobal steps in to simplify your life and reduce your administrative headaches. Whether you need assistance with tax emigration, tax clearance, tax refunds or moving money into or out of South Africa, we’re waiting to help. Leave us your contact details to get the ball rolling and we’ll be in touch soon.