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Withholding tax

8 Nov 2007

This section stipulates that where the Seller is a non-resident and the purchase price is more than two million rand the Estate Agent as well as the Conveyancer are obliged to inform the Purchaser, in writing, that the Seller is a non-resident as the Purchaser is liable for the payment to SARS of a certain percentage of the purchase price. The Estate Agent and Conveyancer could forfeit their fee / commission should they fail to inform the Purchaser of this fact.

Once the Purchaser has been informed of this fact he is obliged to withhold the following percentage of the purchase price and pay the amount over to SARS within 14 days from date of transfer for the account of the Seller.

The percentages are:

5% of the amount payable where the Seller is an individual;

7,5% of the amount payable where the Seller is a company or CC; and

10% of the amount payable where the Seller is a trust.

The Seller can then approach SARS to register as a tax payer and to calculate the correct capital gains payable by him to SARS with regards to this transaction.

We advise that all Agreements of Sale be amended to include the following amendment:

“The Purchaser is required in terms of Section 35A of the Income Tax Act, Act 58/1962 to withhold a certain percentage of the purchase price from the Seller should the Seller be a non-resident and the purchase price exceeds R2 000 000. Such amount will be withheld by the Conveyancers on date of transfer and be paid to SARS on behalf of the Purchaser for the account of the Seller.”