Non-resident sellers – The tax implications of selling a property in South Africa

In terms of Sec 35 of the Income Tax Act, the purchaser of a property (usually the conveyancer on his behalf) is obliged to pay over to SARS, 5% of the gross purchase price on transfer of the property. In the event of a company selling, the deduction would be 7.5% and in the event of a trust, 10%. This provision only applies when a property is sold for more than R2 000 000. Such tax as has been deducted and paid to SARS, will be taken into consideration in the income tax return of such non-resident in his country of residence where he is registered as a taxpayer. A directive can be obtained from SARS should such seller be of the view that no tax is payable.

The amount withheld and paid over to SARS is an advance in respect of that non-resident seller’s liability for tax for the year of assessment during which the property has been sold (which tax can be capital gains tax or income tax, depending on whether the property sold was trading stock, or a once-off transaction which would trigger CGT only).