Property Tax In South Africa

Taxation in South Africa, as in any country, is a complex system and needs the depth of knowledge of an expert to navigate it successfully. Below is a brief outline to help you become acquainted with the structure.

Tax laws are areas that require specialist knowledge and a good tax expert can help property investors legally save tax. We strongly advise property buyers in South Africa to seek professional help and are able to put you in touch with an advisor who will examine your particular needs and assist with your tax planning.

Taxes incurred when purchasing a property in South Africa are standard throughout the country. However taxes for the maintenance of municipal facilities can vary from region to region.

Transfer Duty

Transfer duty is a one-off real estate tax payable at the time of property purchase. In February 2006 the threshold for this tax for individual buyers was raised and the new rates are as follows:

No duty up to ZAR 500, 000 of the purchase price

ZAR 500, 001 - ZAR 1 000,000 5% (R25 000)
ZAR 1, 000,001 and above plus 8%.

Limits for companies purchasing properties have not changed and are charged at a flat rate of 8% of the value of the property.

Tax on Rental Income

Non-resident property owners in South Africa are only liable for income tax when letting out their properties. The tax threshold for individuals is ZAR 43,000.00 and for the over 65's ZAR 69,000.00. Property owners are responsible for registering with the tax authorities and ensuring the correct amount of tax is paid.

Capital Gains Tax

Capital Gains Tax (CGT) is a fairly new tax in South Africa and was introduced in 2001 and applies only to the sale of fixed property. Non-residents are liable for this tax when they sell their property and it is added to the annual income tax bill. South African residents do not pay CGT on the first ZAR1.5 million of profit made on the sale of their primary residence.

Inheritance/Wealth Tax

Inheritance tax was abolished when CGT was introduced, but should the owner of a property die, they are considered to have disposed of the property and CGT becomes payable at this point.

VAT

VAT on the sale of a property is usually not charged, unless the property is part of a new development. However if the seller is a registered vendor for Value Added Tax purposes, in other words a developer of a new residential scheme, VAT at a rate of 14% will be charged as part of the purchase price and the purchaser will be exempted from transfer duty.

Stamp Duty

Stamp duty does not apply in the South African purchase process, nonetheless it is charged on rental agreements. In the 2007 budget, the first ZAR 500 on the rental agreement was exempted from stamp duty.

Municipal/Local Taxes

South Africans refer to these as “property taxes” and they are the charges for services such as refuse collection and street maintenance. This charge is calculated on the municipal value of the house (usually lower than the actual purchase price) and the percentage to be paid varies according to municipality -in Cape Town the percentage in 2007 was 0.98% per annum. A separate charge is levied for sewerage disposal, which is calculated on the amount of waste water leaving the house.

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