Withholding Taxes: non-resident sellers may save money or pay nothing

3 May 2022

AUTHOR: STEFAN LE ROUX, CELINE BAKKER

Good news for non-resident sellers

Section 35A of the Income Tax 58 of 1962 was enacted in September 2007 order to prevent non-resident sellers of immovable property from disposing thereof without having paid over capital gains tax that is due to SARS. Because a non-resident seller has no nexus to SA after having sold their property, the seller may be disincentivised to pay out tax that is due to SARS and, because the seller is not a resident, enforcing SA tax laws may become more complicated. As such it makes things easier for SARS by placing this responsibility on the purchaser to pay over withheld funds to SARS as an advance of the seller’s tax liability and to ensure that non-resident sellers, may leave South Africa knowing that their affairs are in order.

Withheld funds will then be paid over to SARS by the purchaser within 14 days (if the purchaser is a resident of South Africa) or 28 days (should the purchaser also be a non-resident to South Africa) which will entail the tax due to SARS by the seller. The period of 14 days after which the withheld amount must be paid over to SARS is calculated from the date of registration. However, should the parties agree that the amount to be paid over to the seller be before registration, the 14-day period will be calculated from that particular date.

The relevant withheld funds by the purchaser apply as follows:

Non-resident Sellers may apply to the South African Revenue Services for a directive that no amount or a reduced amount be withheld, thereby ensuring that the entire process can be finalised simultaneously with the registration of the property transfer into the name of the purchaser, without the headache of having to apply for refunds or filing tax returns after the fact.  SARS will take into account the following:

• security furnished by the Seller for payment of any tax arising from the sale,
• the extent of other assets in South Africa,
• whether the seller is subject to tax in South Africa, and
• whether the actual tax liability is less than the amount withheld.

Non-residents may wish to purchase another property from the proceeds of the sale, in which case the new acquisition may be taken into account by SARS when issuing the directive.  Section 35A does not apply to selling prices of R2m and below.

Our professionals are dual qualified as attorneys in South Africa and a Solicitors of the Supreme Courts of England Wales and Northern Ireland.  Our non-resident and tax team specialise in:

Our professionals are dual qualified as attorneys in South Africa and a Solicitors of the Supreme Courts of England Wales and Northern Ireland.  Our non-resident and tax team specialise in:

• Exchange Control
• Property Transaction Tax
• Capital Gains Tax
• Withholding Taxes
• Immigrations/Visas
• Tax Directives
• Tax Structuring
• Wills and Estates
• Notarial Services
• Private Equity Finance