When considering legislation and requirements applicable to a particular property transfer, the fact that the entity buying the property is a foreign/non-resident individual or company must be taken into account.
Foreign / non-resident individual
A foreign individual is eligible to purchase immovable property in South Africa provided he or she is in the country legally, and the Immigration Act 13 of 2002 applies to this context.
While there is no obligation on the Registrar of Deeds to police the Act or on the conveyancer to prove that the foreigner is legally present in South Africa, the Act does make it an offence for any persons to assist an illegal foreigner in a matter such as purchasing immovable property. As such, it is important for the status of the purchaser to be clearly ascertained prior to the transfer process proceeding.
The FICA requirements in such a case are similar to that of a property purchase by a resident individual, and will include the original certified copy of the foreign passport, foreign bank details, a utility bill reflecting the individual’s physical address and SARS documents where applicable.
Foreign / non-resident company
A External Company as defined in Section 23 of the Companies Act 71 of 2008 (i.e a company that is conducting business within the Republic) is also eligible to purchase immovable property in South Africa. Such a company is required to register as such an External Company with the Companies and Intellectual Property Commission (CIPC). If a foreign company is not registered as an ‘external company’, it is still possible for this entity to purchase immovable property provided that the conveyancer provides the Registrar of Deeds with documentary evidence (e.g. auditor’s certificate or affidavit from the company director) to the effect that the company need not register.
When it comes to FICA, there are a number of additional requirements, including the following company information and documents (translated into English if necessary): business name, head office address, foreign bank details, foreign utility bill, copy of SARS / VAT information if applicable, resolution by all directors, certified copy of passport of authorised person and CEO, utility bill of authorised person, identity documents of all shareholders with a 25% share or more.
Unlike a foreign company, a foreign trust cannot purchase immovable property unless it is registered as a trust with the Master of the High Court and issued with a letter of authority to confirm this.
Tax when it comes time to sell
According to Section 35A of the Income Tax Act 58 of 1962, where a purchaser acquires property from a non-resident and the transaction exceeds R2m, the purchaser must withhold a certain percentage of the amount payable to the non-resident and pay this amount to SARS on his or her behalf.
The percentage payable will be calculated as follows
- 5% of the purchase price in the case of a natural person
- 7.5% of the purchase price in the case of a company
- 10% of the purchase price in the case of a trust
Where the purchaser is being assisted by an estate agent or conveyancer, this requirement will be communicated to the purchaser in writing and failing to comply with this requirement will result in the purchaser being held personally liable should it be ascertained that the purchaser knew, or should have known.
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