Tax and Property in South Africa
When investing in property in South Africa, the real estate can be bought in your personal capacity, or using a close corporation, a trust, or a company. In all of these cases there are different tax laws which can make a profound difference on the cost of purchase and sale.
VAT or TRANSFER DUTY
If the seller is a registered VAT vendor, then the seller will have to pay VAT on the sale. If the seller is not registered for VAT then transfer duty is payable by the buyer. So you need to consider the total cost of the sale bearing this fact in mind.
- Property Ownership in your Personal Capacity (Natural Person)
If the seller isn't registered for VAT you will have to pay transfer duty on your purchase on a sliding scale based on the purchase price.
0% tranfer duty is payable by the purchaser for purchases up to R500 000
5% tranfer duty is payable by the purchaser for the purchase price balance between R500 001 and R1 000 000
8% transfer duty is payable by the purchase on the balance above R1 000 001
- Close Corporations
If the purchaser is a close corporation then the purchaser will pay transfer duty at a flat rate of 8% of the purchase price.
If the purchaser is a trust then the purchaser will pay transfer duty at a flat rate of 8% of the purchase price.
CAPITAL GAINS TAX
- When selling a property you own in your personal capacity
CGT is payable on 25% of the profit at the seller's nominal rate with the following exclusion applicable. CGT is payable by both residents and non-residents when selling real estate in South Africa.
Excluded from CGT:
- The first R 1,000,000 of profit if the property is the seller's primary residence. This exclusion does not apply to non-residents of South Africa.
- Close Corporations
When a close corporation sells a property, the CC will have to pay CGT 50% of profit at 30%. This is an effective taxation rate of 15% of the profit.
When a trust sells a property, the CC will have to pay CGT 50% of profit at 30%. This is an effective taxation rate of 15% of the profit.