Cape Town property information
Property of any kind in South Africa is normally purchased through a broker or real estate agent who should be registered as a member of the Estate Agents Board.
The South African Reserve Bank refers to foreigners as non-residents whether they be naturalised persons or legal entities, whose normal place of residence, domicile or registration is outside the common monetary area of South Africa.
Should the non-resident be paying cash for the property, the transaction can be processed without intervention from the South African Reserve Bank.
Cape Town property information for Non-Residents
There are no restrictions on property ownership by non-residents, save for a prohibition on illegal aliens owning immovable property within South Africa. There are, however, procedures and requirements which must be complied with in certain circumstances, such as, the local registration of entities registered outside of South Africa when property is purchased in South Africa and the appointment of a South African resident public officer for a local company whose shares are owned by a non-resident. In the event of a non-resident purchasing property in the country with the intention of residing here for longer periods, permanent residency will have to be applied for in accordance with the given requirements and procedures of South African law.
Non-residents purchasing a property in South Africa may borrowup to a maximum of 50% of the purchase price in South Africa; the other 50% of the funds must be brought into the country by the purchaser and transferred from a recognised foreign bank to a bank in South Africa.
The total amount that may be borrowed is at the discretion of the commercial bank offering the loan and Pam Golding International can assist with Cape Town property information in this regard using our in-house Mortgage consultants.
Non-residents who are in possession of a valid South African work permit are considered to be residents for the duration of their work permit and are therefore not subject to borrowing restrictions placed on non-residents without work permits.
Cape Town property information - Legal Documentation
All contracts to acquire land must be in writing, contain certain prescribed information and be signed by both buyer and seller to be valid and legally binding. Contracts most commonly take the form of an Agreement of Sale or Offer to Purchase.
Once an Agreement of Sale has been signed by both parties it represents a valid and binding document from which neither party can withdraw without legal consequences, save for certain instances where:
- The agreement is subject to certain conditions which are either fulfilled/not fulfilled;
- The purchase price is less than R250 000 and certain additional criteria in terms of the Alienation of Land Amendment Act are present entitling the Purchaser to "cool off" before making a final decision.
A non-resident must open a ‘non-resident’ account at a South African commercial bank, to facilitate loan repayments. This account would normally be funded from abroad or from rentals received on the property purchased, subject to the bank holding the account being provided with a copy of any rental agreement.
However, current Exchange Control regulations allow a non-resident desirous of obtaining permanent residence status in South Africa, to be dealt with as a South African ‘resident’ This takes place upon completion of a so-called Immigrant’s Declaration & Undertaking issued by South African banks.
Once such Declaration has been completed, such applicant will be eligible to borrow 100% of the purchase price of the property. However, it will then be incumbent upon such person to actually apply for and obtain permanent residence within a reasonable period.
Exchange Control is currently going through a process of deregulation in South Africa, to make it progressively easier for foreigners to invest in this country, and for South Africans to do business abroad. However, it remains a complex subject and non-residents investing in South Africa are strongly advised to consult a reputable lawyer or accountant for Cape Town property information advice. The Reserve Bank retains considerable control, and while notes and guidelines have been set, allowances will be made for exceptional circumstances.
More Cape Town property information and FAQ
Tax information
Resident individuals and companies are taxed on their worldwide income and their worldwide capital gains. Non-residents are taxed on income derived from a South African source including rental income derived from the letting of immovable property in South Africa. While non-residents generally are not liable for capital gains tax (CGT) they do pay CGT on immovable property or any interest or right in immovable property situated in South Africa.
In determining whether a non-resident has an interest in immovable property, ownership via a company or other entity is taken into account. Where a non-resident holds (alone or together with a ‘connected person’) at least 20% of the equity or interest in a company or other entity, and 80% of the market value of the net assets of that company or other entity is attributable directly or indirectly to immovable property (which is not trading stock) in South Africa, then an interest is held in that property by the non-resident.
Note that the interest can be held ‘indirectly’, typically through the medium of another company, including a foreign incorporated company.
Information and images on this page provided by Pam Golding Property Group
