Most costs associated with purchasing a South African property are on a sliding scale depending on the cost of the property, and the size of the south Africa mortgage. The main costs of purchasing property in South Africa for which the purchaser is responsible are as follows:

• Transfer and Attorney Cost
• South African Property Tax

Transfer and Attorney Cost

Transfer Costs
Transfer costs include transfer duty and conveyancers' (legal) fees. Transfer duty is calculated as a percentage of the purchase price and varies depending on the purchaser's legal status. For a company or trust the rate is 10% of the purchase price and for an individual the calculation is as follows: For a purchase price of R0 - R500 000, the duty is 0%, for a purchase of R500 000 - R1 000 000, the duty is 5%, on the value above R1 000 000, it is 8%.

• R1m purchase price: R25,000.00

Attorney costs
Conveyancer fees are charged by the attorneys for attending to the transfer and registration of the mortgages, and are calculated according to a legal tariff. Please ask your Cape & Country consultant for a breakdown of this tariff. We negotiate a 40% discount for all our clients who use our attorneys.

• Conveyancing attorney's fees: R12,427.00
• Bond Registration attorneys fees: R4,200.00

Who are these attorneys and what do they do?
There are two sets involved in a property transfer (if you are arranging a South African mortgage). The seller appoints the transferring attorney, and the buyer appoints the bond registration attorney. The transfer attorney ensures the transfer of the property from the existing owner to the new owner. The registration attorney registers your mortgage bond at the Deeds Office. In the past there has been a fair amount of 'underhand practices', which has lead to attorneys being struck off for 'purchasing clients'. This is why we are very particular about which attorneys we use, and ensure that a discount is passed directly onto our clients.

Inspection and initiation fees
These are the costs passed on by the banks. The inspection fee is normally around R1,000 and the initiation fee ranges between banks from a few hundred Rand to 1%.

These inspection fees vary according to the price of the property and which bank the mortgage is being arranged with. The inspection fees, or valuation fees are charged by the bank for viewing the property for the mortgage to be secured on. These fees start at R999. Initiation fees are generally R199 to R2,000 with a main retail bank, however if you start using a private bank then these fees can be as high as R1.5%.

South African Property Tax

Tax and the repatriation of funds
All funds introduced from outside South Africa to acquire fixed property within South Africa may be repatriated together with any profit on resale of the property, after deduction of any capital Gains Tax payable, provided the title deed of the property has been endorsed 'non-resident'. Funds introduced into South Africa in the form of foreign loan to fund acquisitions of corporate entities which own property in South Africa, may be repatriated in terms of the original loan approval by the Reserve Bank. The profit on resale may also be repatriated, provided the relevant securities have been endorsed 'non-resident'.

This basically means that none of the rumours of being unable to get your money out of South Africa are true. If you are a non resident buyer, then you are not restricted by any of the exchange control which restricts South African buyers.

Therefore if you sell your property, once you have paid your Capital Gains tax on the profit you have made (effective rate of 10%) then you can repatriate all your money.
Note: always ensure you keep a record of money transfers into the county.

Income Tax
South Africa follows a revenue based income tax system similar to the UK's, thus income earned from a South African source will be subject to ordinary income tax. In particular to property purchasers, any rental earned by foreign nationals in respect of South African properties will be subject to income tax and it is the responsibility of the foreign national to register as a South African tax-payer.

Income earned by natural persons below R27 000 per annum (for persons under the age of 65) and R42 640 (for persons above the age of 65) is exempt from income tax, whilst all income earned over and above the aforesaid amounts, will be taxed at a marginal rate applicable to that non-resident.

Corporate entities are subject to a tax rate of 30% of each Rand of taxable income whilst the equivalent rate for a trust is 40%. Non-resident companies are taxed at a rate of 35% but are exempt from Secondary tax on companies (STC) in respect of dividends paid. The tax structure is based on the UK structure, with the exception that the tax brackets are considerably lower. If you are purchasing a South African property as a non-resident and will be renting the property out then you will need to apply for a tax number. You will have to pay income tax on the rental income in South Africa. Like in other parts of the world you are allowed to deduct the interest portion of your monthly mortgage repayments from your rental income.

Capital Gains Tax
Unlike South African residents who do not pay CGT on the first R1m of profit on the disposal of their primary residence, foreign nationals do not qualify for this exemption. Therefore CGT is payable in the year in which the asset is disposed of and is calculated by adding 25% of the capital gain, or profit, to the individuals income for that year and taxing that income at the individual's marginal rate of income tax. The maximum marginal income tax rate for individuals in South Africa is presently 40%. The capital gain is calculated and disclosed in the individual's income tax return for the year in which it is sold. This works out at a tax rate of approximately 10%.

Foreign nationals are only liable to pay CGT on the disposal of the following: Immovable property situated in South Africa, including any right or interest in immovable property. You have to pay an effective rate of Capital Gains tax of 10% on the disposal of assets in the country. South African residents are allowed the initial R1,000,000 of profit tax free, but no resident must pay tax on the full amount.

Transfer duty
Transfer duty is a tax on purchasing a South African property, like 'stamp duty' in the UK. It is on a sliding scale as laid out above. Every couple of years the Finance minister generally increases those limits to the advantage of all buyers, but in particular to purchasers at the lower end of the property market.

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