Van Wyk Van Heerden Attorneys

ACQUISITION OF IMMOVABLE PROPERTY AS A NON-RESIDENT IN SOUTH AFRICA

Introduction
1.1 Purchasing and taking transfer of ownership of immovable property (land) in South Africa is a fairly easy and uncomplicated process.

1.2 South Africa’s system of land registration is considered one of the best in the world. Precise records of ownership, bonds, servitudes, etc. are kept in the Deeds Registries.

1.3 Transfer of ownership of land passes upon execution by the Registrar of Deeds of a formal transfer deed prepared by a Conveyancing attorney (solicitor).

Restrictions
2.1 There are no restrictions upon a non-resident who is legally in the country to acquire immovable property in South Africa.

2.2 Ownership can be personal, or through a company, close corporation or a trust.

2.3 Which ownership vehicle to use will depend on the particular circumstances and an attorney specialising in this field should be consulted.

2.4 In general, however, personal ownership would be the better option for non-business purposes (i.e. residential). Companies are subject to higher tax rates, set up and annual administration cost.

Sale agreement
3.1 Once a property has been found, a written Agreement of Sale must be entered into and signed by both the seller and the buyer or their written authorised representatives. An oral agreement in respect of land is unenforceable.
3.2 Should the services of an estate agent be used, the agent will normally draft the sale agreement. It is, however, advisable to have the same checked by an attorney. As the Sale Agreement is the most important document creating the rights and obligations between the parties, the parties may prefer to be represented by their own attorneys in the matter, especially in commercial matters.

3.3 If it is a private sale, i.e. over the internet or otherwise without the intervention of an estate agent, the sale agreement would normally be drafted by an attorney.

3.4 The purchaser will, normally, be requested to deposit up to 10% of the purchase price with the agent or attorney. This is not a requirement of law, but serves as security for the seller should the purchaser repudiate the agreement. In such event, the deposit would normally be forfeited to the seller.

3.5 The deposit is normally invested in Trust by the Attorney, interest for the purchaser.

Transfer
4.1 Once the written Agreement of Sale has been concluded, the same will be handed to a Conveyancing Attorney, who will draft the transfer documents and then forward these to the seller and buyer for signature. Only one attorney is used for this purpose, usually the Seller’s attorney.

4.2 The Conveyancing Attorney will request the buyer to pay the costs of transfer as set out below, as well as to furnish a bank guarantee for the balance purchase price, (if a deposit was paid), alternatively to deposit the balance purchase price to the attorney’s trust account.

4.3 The sale is then cleared with the Local Municipality (all outstanding rates have to be paid) and with the South African Revenue Services (“SARS”) for payment of the prescribed Transfer Duty, or exemption if VAT is involved. The documents are subsequently lodged in the Deeds Office for transfer of ownership, thus concluding the process.

4.4 The Deeds office will examine the documents carefully, ensuring that the same are correct. Hence the accuracy of the system.

4.5 The whole process should take between 6 to 8 weeks.

Finance
5. Depending upon the buyer’s cash flow, South African banks will lend up to 50% of the purchase price to non-residents upon a mortgage of the property.

Costs
6.1 The estate agent’s commission equals approximately 6% plus Value Added Tax (“VAT”), of the total purchase consideration.

6.2 If the transaction is subject to VAT, no transfer duty is payable. Residential property purchased from a developer will be subject to VAT.

6.3 If the transaction is not subject to VAT (as is the case with all residential property purchased from non-developers), Transfer Duty on the purchase price is payable to SARS, calculated on the following scale:

• R0 – R600,000.00 of purchase price: NIL
• R601,000.00 – R1, 000,000.00: 3% of the purchase price
• R1,000 000.00 – R1,500,000.00 5% of the purchase price
• Over R1,500,000.00 – 8% of the purchase price

6.4 In addition, the attorneys’ transfer fee for the transfer will amount to approximately 1% of the purchase price plus VAT.

6.5 Where a mortgage loan is taken, the bank will charge a raising fee of approximately R5 700.00 on the loan amount and the attorneys who register the mortgage bond will charge approximately 1% of the capital amount towards registering the mortgage.

6.6 A pro rata share of the Municipal rates and taxes (calculated from date of transfer) and HOA levies will be due by the buyer to the Local Authority and HOA concerned, and will be collected by the Transferring attorney.

6.7 There are no other costs of acquisition.

Taxation: Income Tax
7.1 Residents (as defined in the Income Tax Act) are subject to Income Tax in South Africa on their world wide income. Non-residents are liable for Income Tax in respect of income which accrue from a source in South Africa.

7.2 Thus, income (such as rent) from an asset situate in South Africa will be subject to South African income tax.

7.3 There is presently no withholding tax on rent.

7.4 The property acquired will also, upon its subsequent alienation or death be subject to Capital Gains Tax (“CGT”) in South Africa, provided it was acquired as a capital asset.

7.5 CGT is calculated at a sliding scale with a maximum of 18% of the capital gain for natural persons. For companies it is 22.4% of the gain and for trusts 36%.

7.6 For proceeds of R2 million and more, there is, however, a withholding tax on Capital Gains, which must be deducted from the purchase price and payed to SARS, pending the assessment. – for individuals : 5% of the sale price, for companies: 7½ %, for the Trusts: 10%. One can, however, apply for an upfront determination.

7.7 Accurate records must be kept of all capital improvements to the property.

7.8 The buyer will be required to register as a taxpayer in South Africa. The registration as taxpayer is a simple process and can be done by an accountant or the attorney attending to the transfer.

7.9 Upon the death of the owner the property will also be subject to CGT and Estate Duty (“ED”).

If the property is transferred to a spouse, a roll over of CGT is applicable.

Estate Duty

8.1 R3.5 million of a person’s nett estate is exempt from ED, which is charged at 20% upon the nett estate situate in South Africa. If the property is transferred to a spouse, no ED will be payable upon the demise of the first dying of 2 spouses.

8.2 By example, if the property is less than R7 million no ED.

Exchange Control
9.1 Although very much relaxed lately and expected to be done away with entirely sometime in future, Exchange Control continue to apply in South Africa.

9.2 Thus, Reserve Bank consent will be required to repatriate income earned in South Africa and to repatriate the capital and gain on sale.

9.3 Any amount of money may be transferred into the country to account for the purchase price and costs on a property acquired. A buyer should instruct the receiving commercial bank in South Africa to report the transfer of such monies to the South African Reserve Bank. That will ensure trouble-free repatriation of the amount brought into South Africa as well as any gain made on the property (excluding CGT referred to above) upon resale. The buyer must keep record of the inward transfer, which will be needed to repatriate the money on sale.

Permanent Residence
10. Property ownership in South Africa on the one side, and permanent residence on the other, are two completely separate issues, dealt with in terms of distinctly different criteria. However, the value of a property purchased in the country will be relevant as part of the requisite amount to be brought into the country before an application for permanent residence in the applicable category may be made. One should seek the advice of a specialist (attorney or immigration agent) for the necessary guidance and assistance.

Security
11.1 South Africa has a sophisticated banking system and likewise, the larger firms of estate agents and attorneys are efficient and well-positioned to assist with property related enquiries.

11.2 Presently approximately 1% of all property in South Africa is owned by non-residents.

11.3 Over the past 20 years, virtually all new upmarket residential developments have been in security estates with access control, which happen to be popular buys for non- residents, as it normally provides for a lockup-and-go situation.

The Future
12.1 By virtue of the weakness of the Rand, acquisitions by non-residents have indeed inflated property prices. It has had the effect of putting some properties beyond the reach of even more affluent South Africans.

12.2 Certain African and other countries do have restrictions on the ownership of land by non-residents and there have, thus, from time to time also been calls made for restrictions in this regard in South Africa.

12.3 The distribution of land amongst the people of South Africa has now become a highly emotive political issue, with some political parties holding out to voters that if they acquire land, they would prosper. This is however, as far as Agricultural Land is concerned, not always the situation.

12.4 For many years now, Agri SA has been trying to assist the government in carrying out its programs of land reform, advising them on how to meet their targets within the ambits of the South African Constitution. Lately Agri SA has been finding government more and more difficult to deal with though. The reason being that the land issue will surely be used as electoral bait for the 2019 general election, and as such government seems to be reluctant to engage with the formal Agricultural Sector

12.5 It came, therefore, as no surprise, when in March 2015 the Minister of Agriculture published the Draft Policy and Bill on the Preservation and Development of Agricultural Land. The Draft Bill was suspended within the cabinet for nearly 3 years prior to its publication.

12.6 The Bill is applicable to Agricultural Land only.

12.7 The Bill, inter alia, provides for the following:

12.7.1 No “foreign person” may acquire ownership of Agricultural Land;

12.7.2 This provision will not be applicable where a black person has a controlling interest in the entity that owns the land.

12.7.3 A foreign person means a natural person:

i) Who is not a citizen;
ii) Who is allowed in the country for a limited period only;
iii) Not ordinarily resident in South Africa.

12.7.4 It is interesting that “citizen” includes a person with permanent residence status, in other words such person is not foreign person.

12.7.5 A foreign person may also not enter into a long lease, i.e. a lease for 30 years or longer.

12.7.6 A foreign person who disposes of ownership of Agricultural Land, must offer it to the Minister of Agriculture first, in terms of right of first refusal. The Minister must within 90 days indicate whether the right of first refusal is exercised or not. If the Minister does not exercise the right of first refusal the land may be sold to a citizen only.

12.7.7 The Minister may determine categories of ceilings for Agricultural Land. In other words, the maximum extent a land owner may hold.

12.7.8 Black people have right of first refusal to acquire any land above the determined ceilings, if no black person wants it, the Minister may acquire it through expropriation.

12.8 The general opinion seems to be that the Bill is unconstitutional and will be challenged should it ever become law. In the meantime, it should take a minimum of 2 years to go through the parliamentary process. This, together with a minimum of a further 3 years which a constitutional challenge will take to reach completion, means that it will probably not become law within the next 5 years. By this time, the current hype will have, hopefully, faded into history.

12.9 It is clear that for the foreseeable future, the current position will remain and foreigners will be able to continue to buy and sell Agriculture Land in South Africa.

12.10 Nevertheless, foreign buyers is advised to take two simple precautionary measures to protect their interests:

12.10.1 The first is to acquire the land in the name of a company, which is formed in South Africa.

12.10.2 The second is to create individual companies to purchase each individual title of land separately, should the farm consist of more than one piece of land.

12.11 As the Act applies to the disposition of land only and not shares in the company, the first measure above will ensure the disposal of the company holding Agricultural Land.

12.12 The second measure will take care of the ceiling provision.

12.13 Foreign buyers should, therefore, consult with reputable attorneys, so as to ensure that the acquisition is structured correctly and thus ensure the necessary flexibility in the future.

ANVILLE VAN WYK
BA LLB PG Dip Tax
VAN WYK INCORPORATED
Property & Commercial Attorneys
Paarl, Cape Town, South Africa
E-mail: avw@vwf.co.za
Tel: 021 871 1050 / Extension 112

Bianca obtained her LLB degree from the University of Pretoria in 2013. She was admitted as an Attorney of the High Court in 2016 and subsequent as a Conveyancer in 2018. She specializes in the drafting of contracts, conveyancing and all other property related matters. She is dedicated to excellent service and good client relations.

Danie began his law career in Pretoria, Gauteng, where he opened his own law firm in 1994. Through Danie’s knowledge of the world of media and entertainment his clientele extends to music artists, celebrities, television, and film production houses. In 2000 Danie founded the firm West & Rossouw with colleague Sharon West in the Cape Town Southern Suburbs until March 2024 when Danie accepted an appointment to relocate to the fast growing Cape Winelands to join van Wyk van Heerden in their Paarl office. Danie has a strong interest in family law and High Court litigation, with vast experience in several jurisdictions and high-profile cases in the High Court, the Supreme Court of Appeal, and the Constitutional Court. Danie has been actively involved in the organized profession and served on the Cape Law Society and the Law Society of South Africa (LSSA) communication committees and several years as vice-president of the Cape Town Southern Suburbs Attorneys’ Association. During August of 2022, Danie was appointed by the Premier of the Western Cape, Alan Winde as the Western Cape Government’s representative on the Council of the Stellenbosch University.

Alicia obtained her LLB degree cum laude from the North-West University, Potchefstroom, in 2020. She commenced her articles during 2020 at Van Velden-Duffey Inc, situated in Rustenburg, where she acted as a candidate attorney in the civil litigation department.

Alicia was admitted as an Attorney of the High Court during early 2023, and currently practices as such in the litigation department of Van Wyk Van Heerden.

Maryna obtained her LLB Degree at the North West University, Potchefstroom. Originally from Clanwilliam, she went to school in Paarl at Paarl Gymnasium and returned to embark on her professional career at our firm. She joined our team in 2021 as an article clerk and was admitted as an Attorney during 2023. Maryna is currently appointed in our Estates Department in the Wellington Office.

Milton is a well organised Attorney passionate about offering multidisciplinary legal service, focusing on the best interest of his clients. He aims to provide impetus to the vision of creating new momentum in transforming the legal system. He values cost effective solutions on various matters of law, persist on a flexible approach and strive to allocate the necessary resources to satisfy his clients' needs.


Milton obtained his LLB degree in 2020 from the University of the North West. He was admitted as an attorney of the High Court of South Africa on 3 March 2023. He specializes in Civil and Commercial Litigation, Alternative Dispute Resolution, Mediation, Contracts, Sports Law, Construction Disputes and Insolvency.

Anika obtained her LLB in 2020 from the University of Stellenbosch. She completed her articles at Van Wyk Van Heerden in 2022 and was admitted as an Attorney of the High Court at the beginning of 2023.

She currently practices in the Conveyancing Department where she assists estate agencies and developers, as well as marketing of the firm.

Gawie obtained his BComm and LLB Degrees at the University of Stellenbosch during 2009 and 2011 respectively. He completed his Master of Laws during 2017 in the Law of Trusts and completed a Post Graduate Diploma in Financial Planning during 2019.

He joined the team at Becker Bergh & More Inc. for his articles in Upington during 2013 and worked at the firm for 9 years attending to litigation, conveyancing and commercial matters. He was admitted as Attorney and Notary Public during 2015 and as a Conveyancer during 2016.

Gawie was appointed in the Conveyancing and Commercial Departments of Van Wyk Van Heerden during 2022 in the Wellington Office, providing clients with expert advice on the structuring of transactions, the registration of Trusts as well as general Conveyancing.

Liesl graduated from the University of Stellenbosch with an LLB degree in 2005.  During University she developed a special interest in and passion for Family Law.  Due to the fact that Liesl specialised during her articles, she completed the Practical Legal Training Course presented by UNISA, in conjunction with her articles, which she commenced with Miller du Toit Cloete Inc in 2006.  She was admitted as an attorney of the Western Cape High Court, with Right of Appearance in 2007.

Liesl co-presented a paper titled “African Charter on the Rights of Children” at the London Metropolitan University Summer School in 2011 and received her Certificate of Completion in this regard.

Liesl commenced her articles at Miller du Toit Cloete Inc, under the guidance of Zenobia du Toit, in 2006 and went on to practise as a Senior Associate there for nearly 14 years. After moving to Paarl, she practised as a director of Family Law at Clark Cupido Attorneys.

Liesl joined Van Wyk Van Heerden Attorneys in April 2022, as head of their Family Law department.  She has practised exclusively in Family law and ancillary matters for 16 years.

Roeline specialises in Estate Administration. Roeline obtained her B.Com Law, LLB and LLM (Estate Law) degrees at North-West University in 2006, 2008 and 2010, respectively.
After she completed her articles in 2010, she joined a financial institution as an estate administrator.

She joined the team in 2022 and attends to all Estate matters.

Aleisha grew up in Durban and relocated to the Western Cape to attend the University of Stellenbosch where she completed a Bachelor of Arts Degree in Social Dynamics from 2011-2013. Thereafter she obtained her LLB degree through the University of the Free State with distinction from 2014-2017. She joined Van Wyk Van Heerden in 2018 as candidate attorney and gained experience in various fields of the law, with a special interest in Property Law and the Administration of Deceased Estates. After qualifying as an Attorney and Conveyancer during March 2020 Aleisha joined the team assisting in the Conveyancing and Estates Departments of the firm.

Gaynor obtained her LLB degree in 2012 from the University of Stellenbosch. She then completed her articles at a law firm in the North West Province where she gained experience in General Litigation, Family Law and Debt Collection. In 2016 she moved back to the Western Cape and finally joined the firm in November 2018 where she currently heads up the Debt Recovery Department.

Mariska obtained her Bachelor of Arts and LLB degree from Stellenbosch University in 2018 and 2020 respectively. She completed her Master of Laws, with a special interest in Children’s Rights, in 2021.

She commenced her articles at Van Wyk Van Heerden in 2022 and was admitted as an Attorney of the High Court at the start of 2024.

She currently practices in the Litigation Department where she assists with, inter alia, Magistrate Court litigation; Divorces; and Evictions.

Leonette completed her studies at the University of Pretoria and obtained her LLB degree in 2009. She practised in Rustenburg for 8 years and specialised in debt Recovery, debt review and related matters.

Leonette joined the firm in 2017 and manages all correspondent work.

Carla grew up in the Free State and decided to relocate to the Cape Winelands to study law at Stellenbosch University. She obtained her LLB degree in 2002 and furthered her studies at the University of Cape Town’s School for Legal Practice where she received the Dean’s award for the best student in Business Management and Administration.

She joined the litigation department at Van der Spuy & Partners as a candidate attorney where-after she decided to pursue a career in property and commercial law, specializing in sectional title schemes, security estates and developments, servitudes, subdivisions and consolidations as well as commercial contracting.

Carla heads up the Conveyancing Department of the firm and mainly assists estate agencies and developers and is actively involved in the marketing of the company.

Charl obtained his law degree at the North West University in 2008. And finalised his articles at Van Velden & Duffey Attorneys where after he practised at the same firm and became a director in 2014.

Charl was recruited by Van Wyk Van Heerden in 2017 to strengthen and assist our growing litigation department. He handles a wide range of litigation matters including company, family, insolvency, banking and delictual law.

"Quick, practical and commercial resolution is first priority"

Willem van Heerden is a Director at Van Wyk Van Heerden in the dispute resolution, litigation and mediation department. He specialises in contractual disputes, company law, shareholder issues, evictions, family law, banking law and insolvency law. He provides sound strategic advice and direction on all commercial and company issues.

He is an accredited commercial mediator as well as a business rescue practitioner.

He has encouraged the appropriate use of mediation in the resolution of all disputes.

He has acted for various international and cross border trade, transport, agricultural and construction companies. Willem has acted for major banks, insurance houses, leading retailers, property groups as well as high network of entrepreneurs and individuals. He serves as a trustee on a number of trusts.

Willem has written various articles and is a co-author of a published legal book on farm evictions.

Qualifications

  • BCom (Northwest University)
  • LLB (Northwest University)
  • Postgraduate Diploma (VRIJE University Amstelveen )
  • Admitted as an Attorney of the High Court of South Africa
  • Accredited Business Rescue Practitioner (University of South Africa)
  • Accredited Commercial Mediator

Nazlee Abrahams grew up in Paarl and obtained the degrees B.Sc. and LLB from the University of Stellenbosch in 1992 and 1997 respectively.

She commenced with her articles at Van Wyk Fouchee in 1998 and was admitted as an Attorney with right of appearance in the High Court in 2000 after which she consequently became a Director at the firm.

In October of 2002 she was admitted as Conveyancer and also Notary Public in 2006. She currently manages Bonds registrations in the Conveyancing Department and further specialises in family & marriage law, drafting of wills, administration of estates and all notarial work.

Nazlee makes a valuable contribution in pro-bono work when the opportunity arises and invests a considerable amount of time in community service. She also serves as the current Chairperson of the governing body of William Lloyd Primary.

Anville specialises in Property Law, General Commercial Law, Estate and Tax Planning, Administration of Deceased Estates and Trust Law. Through the years, he contributed to the community life in Paarl. He was a founding member of the Drakenstein Rotary Club in Paarl, founding member of the Paarl Attorneys Association, served as Captain, President and Chairman of the board of the Paarl Golf Club and has played a major role in establishing the Boschenmeer Golf and Country Estate.

Anville obtained his BA LLB degree at the University of Stellenbosch in 1974. He served his articles with Silberbauers Attorneys in Cape Town and joined Solomon Miller, Hymie Maisel and Willem Gaum in Paarl in May 1977.

He is an experienced and seasoned attorney who commenced his career in litigation and migrated into Commercial, Trust and Tax work. He obtained his post graduate diploma in Tax Law at the University of Cape Town, with distinction, in 1993.

Anville celebrated his 40th year in practice in 2017.