Introduction to South Africa

The most important factor, and a fundamental difference to other markets, is that the South African banks are income based lenders. They are therefore more interested in the income potentital of an individual and their ability to afford the property rather than the income producing capabilities of the property itself.

 

The South African bond market is becoming more competitive as more lenders enter the market and bond originators become more popular in negotiating the best deals for their clients. Interest only products are still not available in South Africa and only a capital and interest bond is avaialble at present.

 

We can assist with your bond application and have specialised in obtaining bonds for people based abroad. We deal with specialist teams within the bond departments at all the major lenders who are familiar with overseas applicants and UK labour and structuring laws.

 

 

1.      Mortgage Application Form (completed and signed)
2.      3 months ‘pay slips’ or accountants reference letter to confirm salary (required if clients are self-employed)
3.      3 months personal bank statements
4.      Copy of passport
5.      Address verification by way of a letter from an accountant or lawyer or a utility bill (must show full residential address)

What about income tax (Pay As You Earn PAYE and Standard Icome Tax SITE)?
Depends on the amount you earn and how you are employed. This can be mitigated by careful tax planning.

What about capital gains tax?
Capital Gains Tax is the tax that you pay on any profits you make on your assets when you sell or dispose of your assets in any way. You will therefore not pay Capital Gains Tax on the full amount of the sale, but only on the profits. Individuals only need to pay CGT on 25% of the net gain, while companies, close corporations and trusts need to pay up to 50%.
 
What about Inheritance Tax (“IHT”)?
SA IHT is chargeable on the death of an individual who owns a South African property regardless of where they are domiciled or a tax resident. Estate duty is levied on your dutiable goods after their total value exceeds R1-million. The current tax rate is 25%. The main exemption on this tax is if you leave your goods to your spouse - but then your spouse's estate will become liable for tax duty.
 
How does Transfer Duty work?
Transfers of SA properties are subject to transfer duty at a rate depending on the market value. Currently the rates for an individual purchasing an existing residential property are:

 - R500,000 or below                Nil
 - R500,001 to R1,000,000        5%
 - More than R1,000,000           8% 
 
Transfer Duty is simply a tax levied on the transfer on the land. It is based either on the actual price paid for the property, or the fair market value thereof, which ever is the higher. It is important to note the transfer duty is not payable on the purchase of new development properties.
 
Can I use an investment vehicle?
Yes you can setup an offshore trust or company, but we suggest you speak to a specialist about this, especially if you are concerned about inheritance tax. Most overseas residents who invest in SA property choose to do so directly as this is generally simpler and often more tax efficient.