South Africa follows a system of land registration where ownership is recorded in Deeds Registries where documents may be viewed publicly. This system is one of the best worldwide, with an exceptional degree of accuracy.
When it comes to buying property in South Africa, foreign nationals are subjected to the same laws as South Africans, in that they may purchase and own immovable property in South Africa without any restrictions. They may own property as an individual, jointly, or in foreign companies and trusts.
However, there are certain restrictions on property ownership by non-residents and illegal aliens who are prohibited from owning immovable property within South Africa.
As a Foreign National, one needs to comply with the Immigration Act 13 of 2002 and regulations in order to reside within the country lawfully and enable themselves to purchase property. There are different types of visas that may allow a long-term residency in South Africa.
To qualify to own property in South Africa, a Foreign National must adhere to the following:
- A valid long-term visa;
- Be registered as a South African Taxpayer for Capital Gains Tax (CGT);
- Have a Tax Number;
- Be able to transfer 50% of the purchase price to reserve bank, from a foreign bank to South African Bank Account;
- You need to register in South Africa with the Companies and Intellectual Property Commission (CIPC) – this is only applicable if purchasing in the name of an entity or business; and
- Appoint a local public officer.
FINANCING
Foreigners not working in South Africa will not be granted more than 50% of the bond or purchase price. The remaining 50% of the bond or purchase price would need to be a cash injection generated in South Africa or offshore.
Below is the list of documents required for bond application by a Foreigner:
- Certified copies of passport and valid visa;
- Three months bank statement (Overseas/Offshore);
- Three months’ pay slips (6 months’ pay slips and bank statements where a purchaser earns commission or is paid overtime); and
- Nonresident Bank Account.
Once the financial details of the Foreigner have been finalised, the transferring attorney will register the property in the new owner’s name.
CASH PURCHASE
When purchasing the property in cash, the following must be taken into account:
- The money must come into the country via the reserve bank and a deal receipt showing the exchange rate will be issued;
- There may be a short-term gain when paying the seller directly from an overseas account at a discounted price, however, you will not be able to take the money back out of the country when selling; and
- The money should go straight to an attorney or estate agents trust accounts.
If you buy property through an estate agent, they need to be registered with the relevant professional board, Estate-Agency Affairs Board with the valid Fidelity Fund Certificate.
Additional costs to be considered
Should the value of the property exceed R1,000,000 (One Million Rand) you are liable for transfer duty, which applies to both South Africans and foreign Nationals. Properties purchased from developers will attract Value Added Tax (VAT), which will be included in the purchase price and you will also be liable for transfer cost.
Should the foreigner wish to sell his property, a withholding tax of a certain percentage on the proceeds of the sale of a property, of more than R2,000,000 (Two Million Rand), becomes payable until clearance is received from the South African Revenue Service from any amount to be paid to the seller or the sellers agent. To avoid the above, you need to approach the South African Revenue Service prior to the transfer to obtain a tax directive and in which case only the directed amount will be withheld.
It is important to note that requirements may change from time to time and therefore it is important to obtain advice when deciding to purchase a property. For more information contact our experienced team on goolam@kvnlaw.co.za.
This article is for general information purposes only and should not be used or relied on as legal or other professional advice
