When immovable property is sold, there is usually capital gains tax applicable which is payable on the proceeds of the sale.
If the property is sold by a Non-Resident, SARS needed to ensure that compliance is ensured and introduced Withholding Tax on the disposal of the immovable property.
Section 35A of the Income Tax Act No 58 of 1962 was inserted and deals with the withholding tax in respect of non-residents who dispose of property in South Africa on or after 01 September 2007. This section imposes an obligation on the Purchaser if the purchase price of the property purchased from the non-resident exceeds R2,000,000.00 (Two Million Rand) to withhold a portion of the purchase price from the seller on registration of transfer and pay this portion to SARS.
Currently, the portion to be withheld is determined as follows:
- 7.5% where the Seller is a natural person
- 10% where the Seller is a company, and
- 15% where the Seller is a trust
A non-resident seller may request a tax directive from SARS before the date of registration of the transfer to request that tax be withheld at a lower or even zero rate. The facts of the particular case will be considered to determine whether the sale would attract a lower rate of Capital Gains Tax, for example, if the property has been disposed of at a loss, or the particular Seller has a low level of taxable income.