Selling South African Property While Living Abroad

Why a Portion of the Purchase Price Gets Withheld

Section 35A of the Income Tax Act requires the purchaser of South African immovable property to withhold part of the purchase price whenever the seller is not a South African tax resident, provided the amounts payable in respect of the sale come to R2 million or more. Once that threshold is crossed, the withholding applies to the full purchase price, not only the portion above R2 million. The rate depends on what kind of seller is involved: 7.5% of the amount payable where the seller is an individual, 10% where the seller is a company, and 15% where the seller is a trust. This is not a final tax and not a penalty for living abroad. It is an advance payment toward whatever capital gains tax the seller ultimately owes for the tax year in which the property is disposed of, and it is reconciled once the seller submits a tax return for that year. The conveyancer handling the transfer is legally required to withhold and pay this amount over to SARS, generally within 14 days if the purchaser is a resident or 28 days if the purchaser is not, so sellers should expect this deduction to be built into the settlement figures from the outset rather than treated as a late addition.

Applying for a Directive to Reduce the Withholding

The amount withheld under section 35A is often far more than the seller's actual capital gains tax liability turns out to be, particularly where the property has not appreciated much, where a bond still needs to be settled, or where allowable costs reduce the taxable gain substantially. Sellers are entitled to apply to SARS for a directive reducing or even eliminating the amount to be withheld, using the NR03 application form, based on factors such as security already furnished for the tax due, whether the seller is subject to tax on the disposal at all, and whether the seller's actual liability is lower than the standard percentage would produce. SARS currently allows around 21 business days to process this application, so it is worth lodging the NR03 as early as possible in the transaction rather than waiting until shortly before registration, since the conveyancer cannot finalise the payout to the seller until the withholding tax position has been resolved one way or another.

Signing the Transfer Documents From Overseas

A seller who is not in South Africa when the transfer documents are ready still needs to get a valid signature onto those documents, and the Deeds Registry is strict about how that signature is obtained. One option is to appoint a trusted person in South Africa as attorney under a power of attorney, so that person can sign the transfer and related documents on the seller's behalf. The alternative is for the seller to sign personally while still abroad, but that signature generally needs to be witnessed and authenticated by a South African embassy or consulate, or by a local notary public whose authentication is then apostilled, depending on whether the seller's country of residence is party to the relevant international convention. Either route still requires the seller to go through the usual identity verification and anti-money laundering checks that apply to every client of a conveyancing firm, so it helps to raise the fact that you live abroad with your attorney at the very start of the transaction rather than once documents are already circulating.

Getting the Proceeds Out of the Country

Once transfer has registered and any withholding tax has been settled, the balance of the proceeds due to a non-resident seller is generally paid out through an authorised dealer, such as the conveyancer's bank, rather than as an ordinary domestic payment. Additional supporting documents, including proof of the seller's non-resident status and the source of the funds, are typically required before those funds can be released for transfer abroad. Because these checks sit outside the conveyancer's control, sellers who plan ahead and gather the relevant paperwork early tend to avoid the longest delays at this final stage.

Selling from abroad is manageable, but every one of these steps needs to be handled correctly and in the right order to avoid delays or an unnecessarily large amount being withheld from your proceeds. If you are based outside South Africa and need to sell a property here, our conveyancing team can guide you through the tax directive application, the power of attorney arrangements and the transfer process from start to finish.