Did you know that if you formally emigrate from South Africa, but choose to keep residential property – that the banks are expected to keep the original title deeds. This makes sense for properties that are bonded, as the bank is owed an amount. This initially came as a surprise for properties that were fully paid off…
An understanding of the Emigrations Process adds sense to this unusual request for the ‘last bank’ to hold the original title deeds of a property, which is not bonded. It is the bank that converts your bank account to non-resident status. In so doing, on sale of this property, they will also alert a conveyancing attorney that the property is owned by a non-resident.
Because fixed property is exempted from the CGT arising on the deemed sale of assets – triggered by tax emigration – SARS looks to recover their taxes on the sale of this property – when such sale arises.
The only difference from a normal sale of property by a resident is that conveyancing attorneys are required by tax law to withhold a percentage of the selling price to settle any CGT commitment.
A look at a case study based on the SARS website on 11 February 2020:
This becomes problematic when a residential property is sold for R10 million, and say 7.5% is withheld – being R750 000. Problematic, because the CGT might only be R40 000. So, there is potential for a cash flow strain in such scenarios.
Non-residents may request a directive to lessen the withholding taxes of 7.5% of the Selling price of their properties.
For assistance with specific transactions relating to emigration or post emigration – as non-residents - please contact us. We are an accounting and tax office with affiliation to conveyancing attorneys.
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