Monday 13 August 2007

BUYERS OF LAND BEWARE - TAX TRAP AHEAD!

THE TAX COP IS WATCHING YOU!!!!!

From 1 October 2007, buyers of immovable property are required to withhold "advance taxes" (for CGT - Capital Gains Tax) where the seller is a non-resident.

ALL buyers where the purchase price is R2m or more should now establish whether the seller is a resident or non-resident - not doing so could land you with a hefty liability to SARS.

If you fail to withhold the tax, you become personally liable for it.

Having to double pay between 5% and 10% of the purchase price will be extremely painful.

The scale varies according to whether the seller is a natural person, company or trust.

The percentages are as follows:
- 5% for a party who is a natural person;
- 7.5% for a party which is a company; and
- 10% for a party which is a trust.

It can also be hard to determine whether or not a seller is a "resident" for tax purposes, so you would be well advised to have the sale agreement professionally checked to ensure that it contains clauses to safeguard your position, including-

The seller's written warranty as to his/her/its residence status, and Authority for your attorneys to withhold the applicable percentage if the seller is a non resident or if there is doubt as to what that residence status is, etc.

Estate Agents must also be alert to this danger - they are at risk, not only of losing their commission, but also possibly of incurring liability to the parties.

Primarily the obligation is that of the purchaser however the agent is the agent for the seller and if the agent fails to ascertain the status of his client and the purchaser is assessed by SARS the act places a liability on the agent.

Courtesy: Routledge Modise Attorneys

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