Section 35A of the Income Tax Act was introduced to prevent non-resident sellers from selling immovable property without paying capital gains tax accruing to SARS. There is an obligation on a purchaser where the purchase price is more than R 2 million, to withhold a percentage of the purchase price and to pay the withheld amount directly to SARS.
To determine if withholding tax is applicable to a transaction, it must be determined whether the seller is non-resident. There are two tests to determine residency i.e.: the ordinary resident test and the physical presence test based on the number of days a natural person is physically present in the country.
If a person does not pass either of the above tests, they will be considered a non-resident and the following amounts should be withheld from the purchase price:
1) 7.5 % in respect of natural persons;
2) 10 % respect of a company and
3) 15 % due in respect of a trust.
The withheld amount must be paid to SARS within 14 days after registration of the transaction.
The obligation of the payment rests on the purchaser but there is a duty on the conveyancer and the property practitioner to inform the purchaser that withholding tax is payable. In practice the withholding tax will be paid to SARS by the conveyancer. Non fulfilment hereof can result therein that the conveyancer and property practitioner, to the maximum of their fee and commission respectively, be accountable to SARS for the omission of payment thereof.