Witholding tax payable by Sellers- don't be caught off guard
Category Tax and the Law
If you are a non-resident Seller, section 35A of the Income Tax Act 58 of 1962 will apply when you sell an immovable property in South Africa. The consequence is that you will have to pay withholding tax to SARS on the sale of your immovable property.
This withholding tax is basically a security deposit paid to SARS until the Seller's actual capital gains liability is assessed and determined.
The current withholding tax is 7.5% for an individual, 10% for a company and 15% for a trust. This percentage is applied to the gross sale price and needs to be paid to SARS within a short period after registration of transfer.
The Purchaser and Conveyancer can become liable to SARS if the tax liability is not paid by the Seller so it is the standard procedure that the withholding tax is withheld by the Conveyancer from the purchase price and paid to SARS on registration of transfer of the immovable property.
This can really hit you hard when you sell your property. However, you can avoid having to pay the full withholding tax to SARS if you obtain a tax directive from SARS before the transfer of the property is registered.
A non-resident Seller may apply to SARS for a directive that no amount or a reduced amount be withheld, depending on various factors.
It is always advisable for a non-resident Seller to approach SARS for this tax directive as the amount to be withheld is usually much more than the actual tax liability and in addition, it could take an exceptionally long time for SARS to process the actual tax liability and refund any excess to the Seller.
If you are a non-resident Seller ask your Conveyancer to point you in the right direction to obtain a tax directive from SARS before registration of transfer so that you can avoid having to pay the full withholding tax.
Esti Lombard
Attorney, Conveyancer and Director
E. Lombard Attorneys Inc
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Author: Esti Lombard
