South Africa - Tax Planning
It is important to have an understanding of the tax laws of the country in which you wish to invest. Here you will find an overview of the South African system to help you plan your investment.
Owing to the idiosyncratic nature of worldwide taxation systems, we strongly advise you to consult a tax expert when deciding to make your South African property purchase. The information below is intended as a general guide to tax laws regarding property investment in South Africa.
Tax on Rental Income
Investors in South African property will have to pay tax on the received income at the normal South African rates after expenses, such as mortgage interest, have been deducted. South Africa has double taxation agreements with many countries and the method for taking advantage of this relief will depend on the specific agreement between your home country and South Africa. Our taxation experts are able to give you further information applicable to your country and particular circumstances.
Capital Gains Tax
Capital Gains Tax (CGT) is applied to the sale of all fixed property in South Africa and, for non-residents, becomes due when the property is sold. The expenses incurred in improving a property can be deducted from the capital gain as well as other costs. The capital gain is declared in the income tax statement in the year the property is sold.
There is no VAT charged on the purchase of a property unless it is a new build in which case VAT is built into the purchase price. Neither are rents on residential properties subject to VAT, but it is levied at the rate of 14% on commercial properties.
Inheritance Tax was abolished when Capital Gains Tax was introduced in 2001. However at the time of death the owner of the property is deemed to have disposed of it and CGT becomes due at this point.
Stamp Duty on property purchase is not charged in South Africa. Rental agreements, however, are liable to Stamp Duty although the first ZAR 500 is exempted.
Municipal taxes, or property taxes, are charged for the maintenance of local services and typically vary from province to province as well as individual municipalities. The municipal valuation of the property is used to calculate the amount of tax due.
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