Some useful info on non-resident tax regime
Jun 8th 2005, 9:58 am
#1
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Joined: Apr 2005
Posts: 90
Some useful info on non-resident tax regime
I found the info below on one of the web sites, it has some very useful info reagrding the tax regime for non residents.
TAX
New tax for non-residents
Justin Liebenberg
Thu, 02 Jun 2005
Currently, non-residents of South Africa are subject to income tax on their South African-sourced income. This includes capital gains on the sale of their fixed properties located within the country, or any interests or rights in such properties.
The South African Revenue Service (Sars) has introduced a withholding tax, payable on the sale of fixed properties by non-residents. The withholding tax amount varies and the onus is on the buyer to withhold the relevant amount and pay it over to Sars within a stipulated time frame.
Fixed property that falls within this net includes non-residents' holiday homes and shares in a company, but excludes primary residences (up to R1-million). In the past there were instances where non-residents sent the proceeds from the sale of the fixed property abroad, without paying the necessary income tax. The withholding tax does not apply to properties where the total contract price is less then R2-million. If the amount exceeds R2-million, the full amount is subject to the withholding tax.
An interest in immovable property includes shares in a company where:
more than 80 percent of the net value of the company is attributable to fixed property
the non-resident must hold a minimum of 20 percent of the equity share of the company either directly or indirectly.
The withholding tax rates differ according to the nature of the non-resident seller. An individual or natural person's withholding tax rate is five percent, the company rate is 7.5 percent, and a trust pays 10 percent.
The buyer
The onus is on the buyer to withhold the tax and pay it over to Sars, if the buyer "knows or should reasonably have known" that the seller is a non-resident. It is in the buyer's best interests to ensure this happens otherwise Sars will hold the buyer liable for these amounts, the interest accrued and will also be subject to a penalty of 10 percent. However, Sars may decide to reduce or waive this penalty, depending on the circumstances.
Time frame for payment
The buyer must pay the withheld amount within 14 days from the transaction date. If the buyer is also a non-resident, he will have 28 days to pay over the withheld amounts. If the amounts were paid in a foreign currency, payment to Sars must be translated to rands at the spot rate on the date of payment.
The effect on income tax
The withholding tax paid by a non-resident operates as an advance against his income tax liability for the year of assessment in which the property was disposed. However, the non-resident still has to submit an income tax return.
Estate agents and conveyancers
The act also places an obligation on estate agents and conveyancers, who are entitled to compensation from the sale of the immovable property, to give written notification to buyers that the seller is a non-resident.
Failure to comply will render these entities jointly liable for any corresponding unpaid tax. The penalty is however limited to any fees or commissions earned from the transaction.
Justin Liebenberg is a senior tax manager for Grant Thornton Johannesburg.
TAX
New tax for non-residents
Justin Liebenberg
Thu, 02 Jun 2005
Currently, non-residents of South Africa are subject to income tax on their South African-sourced income. This includes capital gains on the sale of their fixed properties located within the country, or any interests or rights in such properties.
The South African Revenue Service (Sars) has introduced a withholding tax, payable on the sale of fixed properties by non-residents. The withholding tax amount varies and the onus is on the buyer to withhold the relevant amount and pay it over to Sars within a stipulated time frame.
Fixed property that falls within this net includes non-residents' holiday homes and shares in a company, but excludes primary residences (up to R1-million). In the past there were instances where non-residents sent the proceeds from the sale of the fixed property abroad, without paying the necessary income tax. The withholding tax does not apply to properties where the total contract price is less then R2-million. If the amount exceeds R2-million, the full amount is subject to the withholding tax.
An interest in immovable property includes shares in a company where:
more than 80 percent of the net value of the company is attributable to fixed property
the non-resident must hold a minimum of 20 percent of the equity share of the company either directly or indirectly.
The withholding tax rates differ according to the nature of the non-resident seller. An individual or natural person's withholding tax rate is five percent, the company rate is 7.5 percent, and a trust pays 10 percent.
The buyer
The onus is on the buyer to withhold the tax and pay it over to Sars, if the buyer "knows or should reasonably have known" that the seller is a non-resident. It is in the buyer's best interests to ensure this happens otherwise Sars will hold the buyer liable for these amounts, the interest accrued and will also be subject to a penalty of 10 percent. However, Sars may decide to reduce or waive this penalty, depending on the circumstances.
Time frame for payment
The buyer must pay the withheld amount within 14 days from the transaction date. If the buyer is also a non-resident, he will have 28 days to pay over the withheld amounts. If the amounts were paid in a foreign currency, payment to Sars must be translated to rands at the spot rate on the date of payment.
The effect on income tax
The withholding tax paid by a non-resident operates as an advance against his income tax liability for the year of assessment in which the property was disposed. However, the non-resident still has to submit an income tax return.
Estate agents and conveyancers
The act also places an obligation on estate agents and conveyancers, who are entitled to compensation from the sale of the immovable property, to give written notification to buyers that the seller is a non-resident.
Failure to comply will render these entities jointly liable for any corresponding unpaid tax. The penalty is however limited to any fees or commissions earned from the transaction.
Justin Liebenberg is a senior tax manager for Grant Thornton Johannesburg.
Jun 8th 2005, 2:17 pm
#2
Forum Regular
Joined: May 2005
Location: recently returned expat
Posts: 98
Re: Some useful info on non-resident tax regime
Originally Posted by stormer
I found the info below on one of the web sites, it has some very useful info reagrding the tax regime for non residents.
TAX
New tax for non-residents
Justin Liebenberg
Thu, 02 Jun 2005
Currently, non-residents of South Africa are subject to income tax on their South African-sourced income. This includes capital gains on the sale of their fixed properties located within the country, or any interests or rights in such properties.
The South African Revenue Service (Sars) has introduced a withholding tax, payable on the sale of fixed properties by non-residents. The withholding tax amount varies and the onus is on the buyer to withhold the relevant amount and pay it over to Sars within a stipulated time frame.
Fixed property that falls within this net includes non-residents' holiday homes and shares in a company, but excludes primary residences (up to R1-million). In the past there were instances where non-residents sent the proceeds from the sale of the fixed property abroad, without paying the necessary income tax. The withholding tax does not apply to properties where the total contract price is less then R2-million. If the amount exceeds R2-million, the full amount is subject to the withholding tax.
An interest in immovable property includes shares in a company where:
more than 80 percent of the net value of the company is attributable to fixed property
the non-resident must hold a minimum of 20 percent of the equity share of the company either directly or indirectly.
The withholding tax rates differ according to the nature of the non-resident seller. An individual or natural person's withholding tax rate is five percent, the company rate is 7.5 percent, and a trust pays 10 percent.
The buyer
The onus is on the buyer to withhold the tax and pay it over to Sars, if the buyer "knows or should reasonably have known" that the seller is a non-resident. It is in the buyer's best interests to ensure this happens otherwise Sars will hold the buyer liable for these amounts, the interest accrued and will also be subject to a penalty of 10 percent. However, Sars may decide to reduce or waive this penalty, depending on the circumstances.
Time frame for payment
The buyer must pay the withheld amount within 14 days from the transaction date. If the buyer is also a non-resident, he will have 28 days to pay over the withheld amounts. If the amounts were paid in a foreign currency, payment to Sars must be translated to rands at the spot rate on the date of payment.
The effect on income tax
The withholding tax paid by a non-resident operates as an advance against his income tax liability for the year of assessment in which the property was disposed. However, the non-resident still has to submit an income tax return.
Estate agents and conveyancers
The act also places an obligation on estate agents and conveyancers, who are entitled to compensation from the sale of the immovable property, to give written notification to buyers that the seller is a non-resident.
Failure to comply will render these entities jointly liable for any corresponding unpaid tax. The penalty is however limited to any fees or commissions earned from the transaction.
Justin Liebenberg is a senior tax manager for Grant Thornton Johannesburg.
TAX
New tax for non-residents
Justin Liebenberg
Thu, 02 Jun 2005
Currently, non-residents of South Africa are subject to income tax on their South African-sourced income. This includes capital gains on the sale of their fixed properties located within the country, or any interests or rights in such properties.
The South African Revenue Service (Sars) has introduced a withholding tax, payable on the sale of fixed properties by non-residents. The withholding tax amount varies and the onus is on the buyer to withhold the relevant amount and pay it over to Sars within a stipulated time frame.
Fixed property that falls within this net includes non-residents' holiday homes and shares in a company, but excludes primary residences (up to R1-million). In the past there were instances where non-residents sent the proceeds from the sale of the fixed property abroad, without paying the necessary income tax. The withholding tax does not apply to properties where the total contract price is less then R2-million. If the amount exceeds R2-million, the full amount is subject to the withholding tax.
An interest in immovable property includes shares in a company where:
more than 80 percent of the net value of the company is attributable to fixed property
the non-resident must hold a minimum of 20 percent of the equity share of the company either directly or indirectly.
The withholding tax rates differ according to the nature of the non-resident seller. An individual or natural person's withholding tax rate is five percent, the company rate is 7.5 percent, and a trust pays 10 percent.
The buyer
The onus is on the buyer to withhold the tax and pay it over to Sars, if the buyer "knows or should reasonably have known" that the seller is a non-resident. It is in the buyer's best interests to ensure this happens otherwise Sars will hold the buyer liable for these amounts, the interest accrued and will also be subject to a penalty of 10 percent. However, Sars may decide to reduce or waive this penalty, depending on the circumstances.
Time frame for payment
The buyer must pay the withheld amount within 14 days from the transaction date. If the buyer is also a non-resident, he will have 28 days to pay over the withheld amounts. If the amounts were paid in a foreign currency, payment to Sars must be translated to rands at the spot rate on the date of payment.
The effect on income tax
The withholding tax paid by a non-resident operates as an advance against his income tax liability for the year of assessment in which the property was disposed. However, the non-resident still has to submit an income tax return.
Estate agents and conveyancers
The act also places an obligation on estate agents and conveyancers, who are entitled to compensation from the sale of the immovable property, to give written notification to buyers that the seller is a non-resident.
Failure to comply will render these entities jointly liable for any corresponding unpaid tax. The penalty is however limited to any fees or commissions earned from the transaction.
Justin Liebenberg is a senior tax manager for Grant Thornton Johannesburg.
Stormer,as you are living in South Africa, what do you think of the new regulations.
Jun 8th 2005, 2:42 pm
#3
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Thread Starter
Joined: Apr 2005
Posts: 90
Re: Some useful info on non-resident tax regime
Originally Posted by Piccolo
Stormer,as you are living in South Africa, what do you think of the new regulations.
1. Tax receiver has placed an onus on the buyer to make sure that the fees get paid-does this mean that some expats in the past have sold and skiped the country?
2. in terms of fairness: same tax rate applies to both SA's and expats so expats are not placed at any disadvantage by not being SA residents.
Overall, I think it is line with international trends, even though I personaly might feel that the tax rate is on a high side.
Cheers
Jun 20th 2005, 11:19 pm
#4
Just Joined
Joined: Jun 2005
Location: Johannesburg, South Africa
Posts: 3
Some useful info on non-resident tax regime
Stormer - I don't understand how the Capital Gains Tax zero limit on a Principal Private Residence (PPR) can apply to the sale of the property of an individual who is deemed to be a non-resident! Surely, if the owner lives elsewhere (i.e. is deemed non-resident) then how could he/she claim that his South African property is his PPR?
Do you see what I mean? The implications on investing in South African holiday properties are very clear ...
Do you see what I mean? The implications on investing in South African holiday properties are very clear ...
Jun 21st 2005, 8:36 am
#5
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Thread Starter
Joined: Apr 2005
Posts: 90
Re: Some useful info on non-resident tax regime
Originally Posted by Daniel M
Stormer - I don't understand how the Capital Gains Tax zero limit on a Principal Private Residence (PPR) can apply to the sale of the property of an individual who is deemed to be a non-resident! Surely, if the owner lives elsewhere (i.e. is deemed non-resident) then how could he/she claim that his South African property is his PPR?
Do you see what I mean? The implications on investing in South African holiday properties are very clear ...
Do you see what I mean? The implications on investing in South African holiday properties are very clear ...
Good point and to be honest I'm not sure what the answer is. The way I see it even in the worst case scenario where you are forced to pay CGT max amount is what, about 8% on the profits above R1 mil. And again I don’t think it is unfair law in the sense that both SA's and non- residents fall into the same net so it does not discriminate against foreign buyers. Ultimately onus is on the expat buyers to understand how CGT works and the definition of who is a non resident (even SA citizen is considered a 'non resident' for tax purposes if out of the country for longer that consecutive 160 days or so, what happens than in the case of sale?what does law say in this case?can one apply the same logic to foreign non resident?). Be aware of all the tax implications and factor those in when buying a holiday home. There are lot good property law practitioners in SA than can give sound and honest advice for a nominal fee.
Cheers
Jun 21st 2005, 8:47 am
#6
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Joined: Feb 2005
Posts: 1,881
Re: Some useful info on non-resident tax regime
Originally Posted by stormer
Daniel
Good point and to be honest I'm not sure what the answer is. The way I see it even in the worst case scenario where you are forced to pay CGT max amount is what, about 8% on the profits above R1 mil. And again I don’t think it is unfair law in the sense that both SA's and non- residents fall into the same net so it does not discriminate against foreign buyers. Ultimately onus is on the expat buyers to understand how CGT works and the definition of who is a non resident (even SA citizen is considered a 'non resident' for tax purposes if out of the country for longer that consecutive 160 days or so, what happens than in the case of sale?what does law say in this case?can one apply the same logic to foreign non resident?). Be aware of all the tax implications and factor those in when buying a holiday home. There are lot good property law practitioners in SA than can give sound and honest advice for a nominal fee.
Cheers
Good point and to be honest I'm not sure what the answer is. The way I see it even in the worst case scenario where you are forced to pay CGT max amount is what, about 8% on the profits above R1 mil. And again I don’t think it is unfair law in the sense that both SA's and non- residents fall into the same net so it does not discriminate against foreign buyers. Ultimately onus is on the expat buyers to understand how CGT works and the definition of who is a non resident (even SA citizen is considered a 'non resident' for tax purposes if out of the country for longer that consecutive 160 days or so, what happens than in the case of sale?what does law say in this case?can one apply the same logic to foreign non resident?). Be aware of all the tax implications and factor those in when buying a holiday home. There are lot good property law practitioners in SA than can give sound and honest advice for a nominal fee.
Cheers
Unless there is some special (and somewhat punitive) provision in the SA rules, I should have thought that a person who was NOT resident in SA for tax purposes would not be liable for SA CGT.
Paul
Jun 21st 2005, 7:18 pm
#7
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Re: Some useful info on non-resident tax regime
Originally Posted by Pablo
I'd be surprised if the SA arrangements were much different from the UK's. Firstly citizenship has nothing whatsoever to do with tax resident status. Second, a UK (or SA) tax resident is taxable on his worldwide earnings in his country of tax residency. So, assuming he chooses to declare it, a UK tax resident would be liable for CGT on a capital gain irrespective of where in the world that gain was realised. I suspect the rules are similar in SA.
Unless there is some special (and somewhat punitive) provision in the SA rules, I should have thought that a person who was NOT resident in SA for tax purposes would not be liable for SA CGT.
Paul
Unless there is some special (and somewhat punitive) provision in the SA rules, I should have thought that a person who was NOT resident in SA for tax purposes would not be liable for SA CGT.
Paul
