Non-resident sellers: Make sure you comply with SARS requirements

Non-resident property sellers should be aware of the requirements of section 35A of the Income Tax Act 58 of 1962. The section stipulates that an amount equal to 5% (individuals), 10% (companies) or 15% (trusts) of the proceeds of a sale of immovable property must be withheld and paid over to SARS within 14 days after “the date on which the amount was so withheld” – this is typically the date of registration of transfer. An exception is if the parties agree that the purchase price be paid before registration, in which case the 14 days will be calculated from such payment date.

February 24, 2021

In the event that both the seller and the purchaser are non-residents, the date for payment to SARS will be 28 days after “the date on which the amount was so withheld”.

The responsibility for the payment to SARS primarily rests with the seller. If the seller knew or ought to have known and does not withhold and pay the amount to SARS, then the seller will be held liable for the relevant amount plus penalties. If the attorney or the agent knew or ought to have known that the seller is a non-resident, and failed to inform the seller in writing, then the party failing to do so will be liable – the liability will be limited to the fee or commission received respectively.

What is the definition of a non-resident?

Anyone who does not intend to return to South Africa after their “wanderings” or anyone who does not pass the requirements of the physical presence test will be regarded as a non-resident and will be subject to section 35A when selling property.

To meet the requirements of the physical presence test, an individual must be physically present in South Africa for a period exceeding:

  • 91 days in total during the year of assessment
  • 91 days in total during each of the 5 years of assessment preceding the year of assessment under consideration
  • 915 days in total during the 5 preceding years of assessment.

Should a citizen work abroad with no intention of returning to South Africa, and they do not meet the physical presence test, they will be considered a non-resident for the purposes of section 35A withholding tax.

Written by Wessel de Kock

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