SALE OF IMMOVEABLE PROPERTY BY NON-RESIDENT SELLER – SECTION 35A OF THE INCOME TAX ACT NO. 58 OF 1962
EFFECT OF SECTION 35A OF THE INCOME TAX
- Section 35A of the Income Tax Act (“the Act”) came into effect on the 27th of September 2007 and has since imposed certain responsibility on the purchasers in respect of sales of immoveable property by non-resident sellers.
- The section, essentially, states that a purchaser of immoveable property from a non-resident seller must withhold defined percentage from the purchase price due to the non-resident seller and pay the funds to SARS within a stipulated period.
CALCULATION OF FUNDS TO BE WITHHELD
- 7,5% of the amount payable if the seller is a natural person.
- 10% of the amount payable if the seller is a Company.
- 15% of the amount payable if the seller is a Trust.
RESTRICTION OF LIABILITY
- Section 35A does not apply if the purchase price is less than R2 million.
REDUCTION OR EXEMPTION OF LIABILITY
- The non-resident seller may apply to SARS for a reduction of the amount payable or even for zero rate.
CONSEQUENCES OF NON-COMPLIANCE WITH SECTION 35A BY THE PURCHASER
- A purchaser is personally liable if he/she knows or should have reasonably known that the seller is a non-resident.
- If an estate agent or Conveyancer has assisted in the disposal of the property, a purchaser will not be held personally liable if he/she was not notified in writing of the seller’s non-resident status by the agent or conveyancer.
- If an estate agent or Conveyancer should have reasonably known that the seller is a non-resident and fails to notify the purchaser, the estate agent or conveyancer will be jointly and severally liable for the payment of the amount which purchaser is required to withhold but limited to the amount of remuneration or other payment in respect of the services rendered.
The information contained above is just a synopsis of section 35A of the Act and shall not be deemed as legal advice. Thus, please consult your attorney for further information.
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