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A guide to house purchase.
A guide to house purchase.
Finding a suitable permanent home or holiday villa is an important factor in establishing one’s roots in a strange country.
Experience has shown that it is best first to stay in temporary accommodation in order to become acquainted with local conditions and market values. But before you do, you will need to understand the legal implications and requirements not only about purchasing a house but more importantly just what you need to do to comply with South African law in relation to house ownership by non-residents. Non-residents must take professional legal advise on all aspects of property ownership and Immigration. You will need to consider:
The South African Immigration Act 2002:
Entry permits are as follows but a full explanation can be found at www.southafricahouse.com under the home affairs section.
Temporary Residence Visitors Permit:
Initially granted for a three month period but this period can be extended for up to 3 years during which time the applicant must be able to support himself (from overseas funds) whilst in the country.
Temporary Residence Retired Person Permit:
This permit can be valid for up to 4 years provided that the applicant provides proof that they have the right to a pension, an annuity or retirement account, which will give them a prescribed minimum payment for the rest of their life from the country of their origin; or a minimum prescribed net worth. A retired person permit may allow its holder to stay in the Republic on a seasonal or continuous basis at the expiry of which it may be renewed one or more times. Applicants qualify for this permit either by proving a pension worth R20,000 (@ £12= £1,660) paid monthly or alternatively proof of R12million (@ £12=1million) net worth providing a monthly income of no less than R15,000 (@ £12= £1,250)
Permanent Residence:
Financially independent applicants proving a net worth of R12million (@ £12=£1million) with a monthly income of R15,000 (@ £12=£1,250) qualify. Or as above, holders of retired persons permits can apply for permanent residency alternatively, applicants qualify for permanent residence by various other means i.e. work permits, business permits requiring an investment of at least R2.5million (@ £12=£208,000), or corporate permits. In certain circumstances clients can apply for exemptions.
Only visitors from the UK, Australia and Ireland are exempt from obtaining visas to South Africa.
Legal Implications of house purchase:
There are no restrictions in South Africa on owning a house ownership by non-residents. However, all transactions relating to house purchase must be in writing and contain certain prescribed information. After the negotiations the contract (normally provided by the Estate Agent) can be signed straight away. There is no “Exchange of Contracts” as such, once a Agreement of Sale or the Offer Purchase has been signed by both parties it forms a legally binding contract. There are instances where you can withdraw i.e. where certain suspensive conditions have not been met or where the law allows both parties to do so. But apart from these instances neither party can withdraw without incurring the legal consequences.
It is up to the purchaser to satisfy himself as to the condition of the house, the seller is under no obligation to disclose problems other than latent defects. Few purchasers ever have structural surveys carried out which is always recommended in order to establish the house’s condition.
A Purchaser’s Costs:
Rates and taxes.
Transfer duty based on a sliding scale.
The transferring attorneys charge legal fees. The attorneys are often appointed by the seller and unless agreed otherwise their costs are paid by the purchaser.
Any Mortgage (Bonds) costs.
A Seller’s Costs:
Estate Agents fees can be up to 7% of the purchase costs.
Costs of electrical and beetle (infestation) certificates.
Capital gains tax.
Mortgages:
Mortgages or bonds as they are referred to in South Africa are available from financial institutions and banks subject to foreign exchange approval when purchasing but only up to 50% of the sale price. A number of banks offer mortgages in different foreign currencies.
Exchange Control and the Repatriation Of Funds:
Non-residents should ensure that the title deeds of the property are endorsed "non-resident” in order to ensure that all funds brought into South Africa to purchase a house can be repatriated after selling together with any profit (less the relevant income or capital gains taxes).
The Conveyancing process:
Once the seller has accepted an agreement of sale or an offer to purchase the sale is binding and neither party can withdraw without incurring the legal consequences. After any suspensive conditions have been met the seller will instruct his attorney to prepare all the necessary legal documents. This normally takes 4-6 weeks and is the legal process of transferring ownership from the seller to the purchaser via the Deeds Registry. On registration of transfer the purchaser will receive ownership of the house.
Capital Gains Tax:
Non-residents are liable to pay Capital Gains Tax on the sale of a house. This is a tax on the gains or profits arising from the sale. The gain or profit is calculated on the difference between the value of the house as at 1 October 2001 and the selling price. The costs of any improvements to the house and the costs of selling for instance can be deducted before calculation of the profit. Capital Gains Tax is payable in the year in which the house is sold and is calculated by adding 25% of the gain or profit, to the seller’s income for that year and taxing that income at the seller’s marginal rate of income tax.
Income Tax:
Non-residents need to take into account not only South Africa’s income tax laws but also those of their country of residence. Income earned in South African will be subject to income tax. So, any rental earned by non-residents in respect of a house will be subject to income tax less operating costs. Non-residents must then register as a South African taxpayer.
Income earned below +/-R 27,000 @ £12=£2,250 per annum (for persons under the age of 65) and +/-R42, 000 @ £12=£3,500 per annum (for persons above the age of 65) is exempt from income tax. The maximum marginal income tax rate in South Africa is presently 40% (reached at taxable income levels above R240,000 @ £12=£20,000).
Cape Private Properties makes no representation or warranties as to the accuracy or completeness of the contents of this guide and accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the information.
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