Property can be owned individually, jointly or by entities such as a companies, close corporations, trusts or similar entities registered outside South Africa. However, buying property in any foreign country can be complicated and not without legal implications.
Form Of Ownership: There are different types of land ownership in South Africa, the most common of them being:
Freehold: The buyer purchases a freestanding property and takes ownership of the land and the buildings attached to it. The buyer receives a separate title deed to the property and is solely responsible for all maintenance and servicing to the property.
Sectional Title: A purchaser buys a unit (section) in a complex or apartment building. He gets a title deed for his section whereby he owns the section as well as an undivided proportionate share of the communal property. He contributes to shared expenses on a pro-rate basis and is governed by a set of management and house rules
Tax Implications as A Non-Resident:
Non-residents who purchase property in South Africa are required to register as South African tax payers solely for the purposes of their capital gains tax obligation. At the moment, the highest rate of capital gains tax in South Africa for individuals is 10% of the capital profit. The South African Revenue Services have enacted, where immovable property in South Africa is purchased by any person from a non-resident, that purchaser (through the conveyancing attorney) must withhold and pay over to the South African Revenue Service (SARS) from any amount to be paid to the seller or the seller's agent:
7.5% of the amount payable where the seller is a natural person;
10% of the amount payable where the seller is a company; or
15% of the amount payable where the seller is a trust.
The above only pertains to properties that sold for more than R2 Million. The full proceeds of sale, (less any capital gains tax obligation), can be taken out of the country.
Financing The Property:
South African exchange control regulations determine the extent to which foreign buyers can borrow money locally to fund the purchase.
Non-resident purchaser who does not work in South Africa: Non-resident buyer will not granted more than 50% of the purchase price to fund the purchase. The balance must be paid in cash and this may be cash generated in South Africa, or off shore funding.
Non-resident purchaser who is on a temporary work permit in South Africa: May be granted more than 50% of the purchase price, but the loan amount will still depend on the bank's criteria.
A condition of the loan will be that the buyer reduces the bond to less than 50% of the registered amount before they leave South Africa to go back abroad. Some institutions would possibly require a work permit of at least 4 years before they would consider a bond for more than 50% of the purchase price.
The following documentation will be required by the banks before they consider a non-resident for bond approval:
Once The Loan Is Granted:
One option available to a foreigner is to open a special "non-resident" bank account with a South African Financial Institution and ensuring that all funds expended for purposes of the property investment, go through that account.
Your second option is that the funds be transferred directly to the conveyancing attorneys who are appointed to attend to the registration of the transfer of ownership of the property. If requested they will cause the title deed issued to be endorsed by the attorneys' own bankers, facilitating the repatriation of the funds when required.
The buying and selling of property in South Africa is governed in terms of our common law. The transferring attorney's requirements to conclude the transfer are almost the same to that of a transfer to a South African resident, except that regardless of your foreign marriage regime, your spouse still has to sign all the documents pertaining to the purchase of the property.
Signing documentation outside the country:
Conveyancing documents must be signed before either a notary public of the country where the person lives, or at the South African Consulate or Embassy in such country. It is less costly to sign the documents with the South African Embassy in another country however appointment is required with the embassy.
Repatriation Of Funds:
Once a non-resident has brought cash into the country with the intent to purchase property, he can repatriate it (together with the profits thereon) provided the funds were brought through the correct channels when first introduced into the country. The following documentation should be kept by the foreign purchaser to avoid any delays regarding the repatriation of funds from the sale of the property:
Upon the eventual sale of the property, application will be made for Exchange Control Approval for the repatriation of the funds, supported by the following documents in addition to the documents as set out above: