Section 35A of the Income Tax Act places an obligation on a purchaser who pays consideration exceeding R2 million to a non-resident seller of any immovable property in South Africa, to withhold from that consideration, the following amounts:

  1. 7.5% of the purchase price where the seller is a natural person;
  2. 10% of the purchase price where the seller is a company; and
  3. 15% of the purchase price where the seller is a trust.

The amount withheld by the purchaser is an advance in respect of that non-resident seller’s liability for normal tax for the year of assessment.

Both the estate agent and conveyancer must be diligent in informing the purchaser of this duty when dealing with a non-resident seller. If they do not do so, and they knew or should reasonably have known that the seller is non-resident, they can be held jointly and severally liable for payment of the tax, limited to the amount of their respective fees from the transaction.

The seller may apply to SARS for a directive to waive or reduce the withholding tax payable, and, where SARS is satisfied that the seller has sufficient other assets or security in SA, it may issue such a directive. In practice the conveyancer will usually withhold the amount from the seller’s proceeds and pay it to SARS upon registration of the transaction.