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, 2017:
|Value of the property (R)||Rate|
|0 – 900 000||0%|
|900 001 – 1 250 000||3% of the value above R900 000|
|1 250 001 – 1 750 000||R10 500 + 6% of the value above R 1 250 000|
|1 750 001 – 2 250 000||R40 500 + 8% of the value above R 1 750 000|
|2 250 001 – 10 000 000||R80 500 +11% of the value above R2 250 000|
|10 000 001 and above||R933 000 + 13% of the value above R10 000 000|
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. Inclusion rate: 40% Effective rate: 16.4% (as of 1 March, 2016)
- 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.)
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 14% 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.