Millions of foreign visitors to South Africa purchase local properties. It’s easy to fall in love with the country. And equally easy to purchase property. South Africa has one of the most accurate and secure deeds registrations systems worldwide. This makes transfer easy and guarantees tenure. Provided certain procedural requirements are met, foreigners may own property individually, jointly or in undivided company shares or entities registered outside of South Africa. In the case of the latter, non-resident property buyers first have to register that entity in SA and appoint a local public officer in respect of a local company whose shares are held by a non-resident.
To ease the process of purchasing units in Admiral Beach, we recommend engaging with the developer’s consultant who will commission reliable transferring attorneys familiar with specific local regulations particular to international investors. Non-residents purchasing property in South Africa with the intention to reside for extended periods mush comply with the requirements of the Immigration Act, 2002, and apply for the relevant residency permit.
The legal process
South African common law governs local property transactions. To conclude a transfer, spouses must sign all documents pertaining to the purchase of the property, regardless of couples’ foreign marriage regime or whether you are registering a bond to finance the property or not.
If transfer documents are signed outside of South Africa, the signatures must be authenticated by the South African diplomatic or consular mission or notary public of the country where the person lives.
When applying for a bond in South Africa, banks will require a non-resident to supply the following documents to ensure compliance with the Financial Intelligence Act, 2001, and to provide proof of income:
- a certified copy of their passport
- three months’ foreign bank statements
- three months’ pay slips (or six months’ statements and payslips for buyers earning commission or overtime).
Property buyers pay transfer duty or VAT (Value-added Tax) of 15% to the South African Revenue Service, depending on whether the property seller is a VAT vendor or not. If the seller is a VAT vendor (such as a property developer, if you are purchasing a newly-built property), the seller pays VAT of 15% on the purchase price. If the seller is not a VAT vendor, then only transfer duty is payable, barring certain exemptions.
The payment process
In accordance with South African exchange control regulations, local banks may not grant non-resident buyers more than 50% financing of the property purchase price. The balance must be paid in cash from off-shore funding.
Non-resident buyers on a temporary work permit in South Africa may apply for more than 50% of the purchase price, on condition that the buyer is considered a resident for the duration of the work permit. However, the exact amount of the loan will depend on the bank’s criteria, and a further condition for granting the loan would be that the bond is reduced to less than 50% of the registered amount before the applicant leaves South Africa. In some cases, a work permit of at least four years may be required for a bond of more than 50% of the purchase price.
Buyers may pay the seller directly via an overseas account, but may not repatriate such payments when selling the property. Buyers pay funds directly into their South African attorneys’ trust accounts in accordance with the Financial Intelligence Centre Act, 2001.
Foreign buyers, or any entity used to buy or sell the property, must obtain a South African tax number through their attorneys or tax consultants, and register as South African tax payers for the purposes of Capital Gains Tax (CGT) obligations, as well as for the purposes of income tax, should they generate an income from the property.