By Geo Kilian
Recent reports show that currently, the South Africanpropertymarket is booming and that buyers are showing interest from all corners of the globe. The northern suburbs of Johannesburg, and many Western Cape areas, such as Cape Town, the West Coast, and the Garden Route are said to be on the foreignpropertybuyers radar. Expats are also returning to home soil, from European countries such as the United Kingdom, Ireland, and Germany, as well as the Middle East and the United States, andbuyingproperty.
In light of this interest among both returning South Africans and foreign investors, buyers must navigate the associatedtaxobligationswith care. Proactivetaxplanning before repatriation orpropertyacquisition can mitigate potential challenges and optimise financial returns. Moreover,propertyprofessionals catering to clients in this market must be armed with a comprehensive understanding of the legalobligationsand compliance requirements associated with such transactions.
Returning South Africans
South Africans who financially emigrated and relinquished theirSAtaxresidency andtaxnumbers on their way out will face a few hurdles when trying to purchase apropertyin South Africa on their return. South African financial institutions as well as Sars will now see you as aforeigner, which has many ramifications in apropertytransaction. Bank loans, for instance, are, according to Reserve Bank rules, only granted at 50% of the purchase price to foreign buyers. So foreign investors will either need to provide a 50% deposit, or pay cash and introduce the full amount into South Africa via Reserve Bank approval.
Sars too, may flag a returning resident who reinstates theirtaxstatus after being abroad and not paying South Africantax. This can sometimes be viewed by Sars astaxevasion, and Sars may raise an assessment.
The wise move, accordingly is to initiateyourtaxplanning before returning home or before purchasing apropertyin South Africa if you are aforeigner. The mosttax-effective solutions may be found in offshoretaxplanning and structures. If you structureyourassets correctly, you can significantly reduceyourtaxliability. Most returning expats just want to get home in a hurry, however, planningyourfinancial return should be the first thing you do.
Foreign buyers
Propertyprofessionals in South Africa have noted the uptick in foreign investment, with South Africa garnering considerable foreign investment interest, helped by government incentives through the Foreign Investment Act. This legislation offerstaxbreaks, import-export privileges, and access to foreign currency accounts to international investors.
However, prospective foreignpropertybuyers must adhere to South African legal regulations by obtaining necessary approvals and permits.
Sars will look at the number of days you reside inSA, the country you are from,yoursource of funds, and evenyourflight activity can be monitored.
Rules on foreign transactions will apply, andpropertypurchases will be subject to transfer duty, as well as, obligationssuch as Capital GainsTaxor WithholdingTax. Foreign investment should be structured taking into account local rules and requirements, yet making the most of what is available fortax-effective investment into the country.
