Foreign Interest in South African Immovable Property

The South African property market’s continued growth in the last 10 years has proved to offer valuable investment opportunities, both for local buyers as well as for foreign investors. However, as with many transactions that reach cross international borders, a property purchase by an individual or company needs to comply with a specific set of regulations.

Property Blog Articles | Advice | Contractual Matters | Market News

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.

Follow Snymans on Facebook for more legal information, tips and news about property.

8086

Recommended for you

Property Blog Articles | Advice | Contractual Matters | Market News
Legislative Guidelines

Legal Practice Act to regulate client engagement in the legal practice

2266

The process regulating client engagement has been amended in terms of the Legal Practice Act, 28 of 2014 (LPA), effective as of 1 November 2018, to ensure greater transparency.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Legislative Guidelines

Historical municipal debt

4865

Prior to the landmark decision in Jordaan and Others v City of Tshwane Metropolitan Municipality and Others [2017] there was some uncertainty around debts incurred by previous owners of a property.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Legislative Guidelines

Municipal Valuations and Disputes

9697

Municipal property valuations can assist sellers in determining an appropriate asking price for a property, but property owners should also keep an eye on these figures so as to plan their monthly expenses properly…

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Legislative Guidelines

Borehole regulations you need to know

14074

Putting in a borehole on a property is often an attractive option for owners as it provides a convenient and cost-effective source of water. But before drilling for water, be sure to comply with all relevant regulations to avoid unpleasant penalties.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Legislative Guidelines

The Deeds Office purpose and process

14841

All title deeds – documents that confirm ownership of immovable property that is land – are registered, processed and stored by the South African Deeds Office. This information is vital as part of property transfers and ensuring accurate data is contained in the Deeds Registry is important for all parties concerned.

Read More

Need more Snymans content?

Sign up for our monthly newsletter.

Foreign Interest in South African Immovable Property

The South African property market’s continued growth in the last 10 years has proved to offer valuable investment opportunities, both for local buyers as well as for foreign investors. However, as with many transactions that reach cross international borders, a property purchase by an individual or company needs to comply with a specific set of regulations.

Property Blog Articles | Advice | Contractual Matters | Market News

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.

Follow Snymans on Facebook for more legal information, tips and news about property.

8086