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Serious problems await those who fail to verify a property seller's residency status

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Serious problems await those who fail to verify a property seller's residency status


The South African property market must take note that the Act relating to foreign property buyers which came into effect on 1st September can have serious implications for those who ignore its stipulations, warns Tony Clarke, MD of Rawson Properties.



“The new law, which was much debated in its formation period, makes it obligatory for any person buying property from a non-SA resident for R2 million or more to hold back a certain percentage of the property price (5 % in the case of private individuals, 7,5% where the seller is a closed corporation or 10% where the seller is from a trust).  The buyer has also to ensure that the Receiver of Revenue receives this sum timeously:  the purchaser is a resident, within 14 days of the money being withheld and if the purchaser is a non-resident, within 28 days.

 

If this is not done, Clarke says, the buyer, the conveyancer and the estate agent will be held liable by the Receiver for the full amount of their respective fees.

 

It is, therefore, he says, absolutely essential that the purchaser ascertains the residential status of the seller at the outset and this has to be proved with documentation – an untruthful word of mouth assurance from a seller wanting to avoid Capital Gains Tax will not be accepted as an excuse by the Receiver.

 

The estate agent and the conveyancer, he adds, have an obligation to inform the buyer in writing that the seller is a non-resident. If they do not fulfil this obligation and they know, or should have known that the seller is a non-resident, they may be liable for payment for the fees that they earned on the transaction.

 

Should no estate agent or conveyancer be involved, the purchaser can be held liable for payment to SARS of the tax, including penalties and interest.

 

Asked how a buyer can minimise this risk, Clarke said that dealing with a qualified agent who would ensure that extensive affidavits dealing with residency status, involvement with local companies and property portfolio's are completed – and this would probably knock out chances of a deception being accepted.

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