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Non-resident Capital Gains Withholding Tax On South African Immovable Property

03 January 2006   (0 Comments)
Posted by: Author: Gavin Goertz
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Non-resident Capital Gains Withholding Tax On  South African Immovable Property

South Africans are taxed on their world wide income if they are regarded as "residents" for tax purposes.On the other hand, non-residents are subject to tax in South  Africa on a source basis.For example, where a non-resident owns a property in South Africa which he sells, any payment  received   is regarded as having originated from a source in South Africa and may be subject to tax .

The amount to be withheld by a purchaser represents an advance of the non-resident seller's tax liability.The purchaser must pay over the amount  withheld  to SARS together with a declaration within 14 days of  withholding the amount.Where a purchaser knows, or should have known, that the seller is a non-resident and fails to pay over the amount to SARS, he will become personally liable for the payment of the amount.

A purchaser will, however, not be personally liable where an estate agent assists in the sale of the property and has failed to notify the purchaser that the seller is a non-resident.It is obvious that this section places an obligation on an estate agent to notify a purchaser of the fact that a seller is a nonresident and that the provisions of Section 35(A)  may apply  to the purchaser.

Where an estate agent fails to notify a purchaser, the estate agent  will be  personally liable for the payment of the amount  which the purchaser was to withhold.Thee state agents liability  in this regard   is,however, limited to the amount of commission received.Very importantly, where the purchase price of the   property is less than R2 million the provisions of Section 35(A) do not apply.

Source: By Gavin Goertz (TaxTALK)


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