Non – resident Sellers of Immovable Property – 1 September 2007 – Layman Version

Understanding Tax Withholding for Non-Resident Property Sellers in South Africa

• • If you are a non-resident of South Africa and you sell immovable property (like a house or land) located in South Africa, there’s a specific tax rule that applies to your sale. This rule helps the South African Revenue Service (SARS) collect potential capital gains tax from foreign sellers.

Key Points to Know:

• • When it Applies: This rule has been in effect since 1 September 2007. It applies if the selling price of the property is more than R2 million.
  • Who Withholds the Tax: The buyer of your property is legally required to hold back a portion of the purchase price. This amount is then paid directly to SARS.
  • Who is a “Non-Resident”? The rule applies specifically if you, the seller, are not considered a resident of South Africa for tax purposes.

Standard Withholding Rates:

• • The amount the buyer must withhold depends on the type of seller you are:
    • If you are a natural person (an individual), the buyer must withhold 5% of the purchase price.
    • If you are selling through a company, the buyer must withhold 10% of the purchase price.
    • If you are selling through a trust, the buyer must withhold 15% of the purchase price.

Can You Pay a Lower or Zero Rate? Yes!

• • It’s possible to request that the tax be withheld at a lower rate or even no rate (zero). The reasons for this depend on your specific situation. For example, you might qualify if:
    • You are fully exempt from income tax in South Africa.
    • As an individual, you have a low taxable income for that tax year.
    • You are selling the property at a loss (meaning you sold it for less than you bought it for, after considering costs).

How to Request a Lower or Zero Rate (Tax Directive):

• • To apply for a lower or zero withholding rate, you need to follow these steps:
    • Complete Form NR03.
    • Gather Supporting Documents: You’ll need to submit this form along with your offer to purchase the property, a tax calculation showing your expected tax liability, and any other supporting documentation relevant to your case.
    • Submit Your Application: You can send these documents to SARS via email at nres@sars.gov.za or use one of the other submission methods described on Form NR03.
    • Processing Time for Your Request:
    • SARS generally processes these requests (called “directive applications”) within 21 business days.