Buying property as a natural person means buying the property in your own name i.e. as an individual and not in a legal entity such as a Close Corporation, Company, or Trust.
If you are married in community of property by South African law, or by customary law or by the laws of any other country, then your spouse is legally required to sign the offer to purchase if you are buying or selling a property as an individual.
In my opinion, buying property in your own name without the protection that a legal entity such as a Close Corporation, Company, or Trust offers can be risky. This is particularly relevant for people that run their own business and purchase their home in their own name. If at any time you are unable to pay your creditors, the home that you live in as well as any other properties that you own in your own name may become the prime target of your creditors.
A natural person:
- Pays transfer duty at the following rates for properties acquired on or after 1 March, 2020:
|Value of the property (R)||Rate|
|1 – 1000 000||0%|
|1 000 001 – 1 375 000||3% of the value above R1 000 000|
|1 375 001 – 1 925 000||R11 250 + 6% of the value above R 1 375 000|
|1 925 001 – 2 475 000||R44 250 + 8% of the value above R 1 925 000|
|2 475 001 – 11 000 000||R88 250 +11% of the value above R2 475 000|
|11 000 001 and above||R1 026 000 + 13% of the value exceeding R11 000|
Pays Capital Gains Tax: tax on disposal (sale or death), except on your primary residence where the first
R2, 000,000 capital gain is excluded.
- Will be liable for Estate duty - at 20% on estates in excess of R3, 5 million (Your attorney can advise you on the applicable deductions.), and 25% on estates in excess of 30 million Rands.
Other Tax Considerations:
No transfer duty is payable if the seller is registered for VAT (and the property is part of the operations for which the seller is registered), but VAT at the rate of 15% is payable. If the contract does not specify that the VAT is to be paid over and above the purchase price, then it is deemed to be included in the purchase price.
If the property is sold as a rental enterprise or as a going concern e.g. a guesthouse, the deed of sale must contain certain specific provisions and may be zero rated for VAT. This means that no transfer duty or VAT is payable.
If the purchaser registers for VAT, then the Vat (or the transfer duty) can be claimed back as an input credit in certain defined circumstances.
If a property investor does not acquire a property with the intention of holding it for an indefinite period or for rental purposes, but with the intention of selling it to make a profit, then SARS may well regard the investor as a dealer and levy income tax at the investor's tax rate on the profit. Capital gains tax will not apply if income tax is payable.