If you live overseas and still own a home in South Africa, selling it comes with one extra step that many owners don’t expect. When the seller is not a South African tax resident, the buyer may have to hold back part of the price and pay it to SARS. This is known as non-resident seller withholding tax, and it is worth understanding before you accept an offer.
What is non-resident seller withholding tax?
The Income Tax Act says that when a non-resident sells property in South Africa for more than R2 million, the buyer must withhold a percentage of the price and pay it to SARS. It is not an extra tax. SARS treats it as an advance payment (money paid upfront) towards the tax you owe on the sale, such as Capital Gains Tax, for the year in which you sell.
In practice, the conveyancers (the attorneys handling the transfer) usually hold the amount back when the transfer is registered and pay it over on the buyer’s behalf.
What sellers need to know
1. It depends on your tax residence. SARS has its own tests. It looks at whether South Africa is the place you naturally return to and, if not, how many days you have spent here over the last few tax years. If you have moved overseas, a tax practitioner can tell you where you stand.
2. R2 million is a threshold, not a deduction. Once the price is more than R2 million, the percentage is worked out on the full purchase price, not only on the amount above R2 million.
3. The rate depends on who is selling. According to SARS, it is 7.5% for an individual, 10% for a company and 15% for a trust.
4. The money must reach SARS quickly. A South African resident buyer must pay it to SARS within 14 days of withholding it. A non-resident buyer has 28 days.
5. Deposits are treated differently. Nothing is held back from a deposit until the sale becomes unconditional (in other words, once conditions such as the buyer’s bond approval have been met). The amount is then withheld from the payments that follow.
6. Everyone involved has a duty. A buyer who knew, or should reasonably have known, that the seller is a non-resident can be held personally liable for the amount. Estate agents and conveyancers must tell the buyer in writing that the seller is a non-resident. That is why we ask about your residence status right at the start.
Can less be withheld?
Yes. You can apply to SARS for a tax directive (a written instruction from SARS) that allows a lower amount, or nothing at all, to be withheld. SARS gives examples such as selling the property at a loss or having low taxable income. The application is made on form NR03, together with the offer to purchase, a tax calculation and supporting documents. SARS says it generally processes these within 21 business days.
What to watch out for
Without a directive, the full percentage goes to SARS and you will receive less on transfer. SARS expects you to submit a tax return for the year of the sale. If more was withheld than the tax you owe, the difference is refunded only once SARS has finalised its assessment, and that can take time. If you are relying on the proceeds for your next purchase, factor this in.
Plan ahead
- My advice is to tell us and your conveyancer that you live outside South Africa as soon as you decide to sell. Your sale agreement will usually also ask you to confirm this before transfer.
- Speak to a tax practitioner early about your residence status and whether a directive could apply to you.
- If it does, ask for the application to go in as soon as the sale agreement is signed, so SARS has time to process it before transfer.
- Make sure your South African tax affairs are up to date, as any refund depends on SARS assessing your return.
For more on getting ready to sell, read our articles on finding your title deed and the hidden costs of selling property, which also touches on Capital Gains Tax.
Selling from abroad? We are here to guide you every step of the way, wherever you are.
Useful links
- SARS: Non-resident sellers of immovable property
- SARS: Guide to amounts withheld when a non-resident sells property in South Africa
- SARS: Tax and non-residents
- STBB: Property withholding tax for non-resident sellers
Sally Gracie
Chas Everitt Cape Town South
This article is general information, not tax advice. Requirements can change, so confirm what applies to your sale with your tax practitioner and conveyancer.