HOW HARD IS IT TO BUY PROPERTY AS A FOREIGNER

Not everyone is comfortable with the idea of renting for accommodation. Some don’t even believe on that idea especially because it is coming from that perspective of making another person rich. Property can be owned individually, jointly or by entities such as companies. Close corporations, trusts or similar entities registered outside South Africa also apply. However, buying property in any foreign country can be complicated and not without legal implications.

 Form Of Ownership:

There are different types of land ownership in South Africa, the most common of them being:

 Freehold:

The buyer purchases a freestanding property and takes ownership of the land and the buildings attached to it. The buyer receives a separate title deed to the property and is solely responsible for all maintenance and servicing to the property.

 Sectional Title:

A purchaser buys a unit (section) in a complex or apartment building. He gets a title deed for his section whereby he owns the section as well as an undivided proportionate share of the communal property. He contributes to shared expenses on a pro-rate basis and is governed by a set of management and house rules

 Tax Implications as A Non-Resident:

Non-residents who purchase property in South Africa are required to register as South African tax payers. This is solely for the purposes of their capital gains tax obligation. Currently, the highest rate of capital gains tax in South Africa for individuals is 10% of the capital profit. The South African Revenue Services have enacted, where immovable property in South Africa is purchased by any person from a non-resident, that purchaser (through the conveyancing attorney) must withhold and pay over to the South African Revenue Service (SARS) from any amount to be paid to the seller or the seller’s agent:

7.5% of the amount payable where the seller is a natural person;

10% of the amount payable where the seller is a company; or

15% of the amount payable where the seller is a trust.

 The above only pertains to properties that sold for more than R2 Million. The full proceeds of sale, (less any capital gains tax obligation), can be taken out of the country.

 Financing The Property:

South African exchange control regulations determine the extent to which foreign buyers can borrow money locally to fund the purchase.

Non-resident purchaser who does not work in South Africa:

Non-resident buyer will not granted more than 50% of the purchase price to fund the purchase.

The balance must be paid in cash and this may be cash generated in South Africa, or off shore funding.

Non-resident purchaser who is on a temporary work permit in South Africa:

May be granted more than 50% of the purchase price, but the loan amount will still depend on the bank’s criteria.

A condition of the loan will be that the buyer reduces the bond to less than 50% of the registered amount before they leave South Africa to go back abroad.

Some institutions would possibly require a work permit of at least 4 years before they would consider a bond for more than 50% of the purchase price.

The following documentation will be required by the banks before they consider a non-resident for bond approval:

  • A certified copy of the passport.
  • 3 months overseas bank statements.
  • 3 months’ payslips (6 months statements and payslips where the purchaser earns commission or is paid overtime).

 Once The Loan Is Granted:

One option available to a foreigner is to open a special “non-resident” bank account with a South African Financial Institution and ensuring that all funds expended for purposes of the property investment, go through that account.

The post HOW HARD IS IT TO BUY PROPERTY AS A FOREIGNER appeared first on Entertainment SA - South African Entertainment News, Celebrity and Lifestyle Online Magazine & Entertainment.



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