07 Mar

Withholding Tax for Non Resident Sellers

Withholding tax is an amount that must be deducted, by the buyer of a property, from the purchase amount paid to the seller, which the buyer must then pay to SARS.

Withholding tax is a government requirement and an attempt to prevent tax evasion, especially in the case of property sales by non-residents that are not liable for South African Income Tax.

This tax serves as an advance payment towards the final income tax liability, to Sars, by the seller.

If a non-resident sells a property for more that R2 Million, then 7.5% of the selling price needs to be paid over to SARS according to section 35A

You might not know, but if a non-resident holds 20% or more of the shareholding of a South African Company (or CC) then 10% needs to be withheld as a “provisional capital gains tax payment”.

TAX DIRECTIVE

The seller may apply to the Commissioner at SARS that no amount or the reduced amount be withheld by the purchaser (section 35A(2))

Section 35A(3) provides that the amount withheld from payment to the seller is an advance towards his normal tax liability for the year of assessment during which the property is disposed by him.