Section 35A Withholding Tax on Non-Residents Selling Immovable Property

22 February 2017

Now to most of us, everyday folk, speaking about taxes or laws in the property industry goes in the one ear and right out the other. It just feels like something that would boggle the mind or take at least a good couple of years intense studying of the property market and its laws to understand it.

So, let’s break it down so that we all can understand how certain rules and regulations will affect your current property sale and your pocket.

The aim here is to give a quick and basic definition of what Section 35A is about and how immovable property sales are affected by it.

Section 35 A Withholding Tax On Immovable Property

Section 35A is a functioning component of the South African Revenue Service (SARS) Income Tax Act, intended to ensure that accountability to the tax law is upheld, stipulating when resident and non-resident purchasers are responsible for tax amounts to be paid to SARS on the successful sale of any immovable property, e.g. a residence to a non-resident seller. The obligation amount to be paid by the purchaser is withheld from the consideration which is in excess of R2 million.

The nitty gritty about selling immovable property in South Africa

Immovable property, real estate or properties are all synonymous to this Act’s application. The Act defines it as an immovable object that’s incapable of being physically shifted or relocated without demolishing it.

The selling process follows like most other movable property sales, however; with selling an immovable property the Deeds Registration Office acts as a registry and establishes the delivery of the property to the new owner. Ownership will forward regardless of the status of payment, but there are regulations that pertain to the transfer of ownership in relation to financial documentation.

When the seller is a non-resident of South Africa, Section 35A applies.

How Section 35A is applied

A non-resident purchaser of an immovable property is required to pay a specific amount in Income Tax to SARS (South African Revenue Services) within a stipulated timeframe, where the seller is a non-resident. The amount is withheld as mentioned before. In the case of a resident purchaser, the maximum days to complete payment is 14 days and 28 days for a non-resident purchaser. If the amount is underpaid there will be a penalty fee of up to 10%. Any responsibilities or agreements that aren’t reached will result in more penalties. It is the purchaser’s responsibility to meet all requirements and agreements as stipulated within the transaction.

See below table for the recent tax amendment to income tax percentages charged to the purchaser:

  • 5% - If the seller is a natural person
  • 7.5% - If the seller is a company
  • 10% - If the seller is a trust

Find a skilful real estate agent who understands and is experienced in the Section 35A Act. This will benefit any future purchaser or non-resident seller who needs to sell a property, making sure that all regulations are followed and payments are submitted on time, to avoid unnecessary interest payments.

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