Many people are not aware , but there are 4 types of property ownership in South Africa . They are natural person , a company , a corporation or as a trust .
Natural Person This is the most common ownership and refers to buying a home and having it registered in your name . The benefit is some relief on the transfer duty which is guided by the 2017 Budget . Properties up to R900 000 are exempt from transfer duties . Properties between R900 001 to R1,25 million pay 3 % on the value above R900 001 . The sliding scale continues to peak of 13 % on properties exceeding R10 million .
Capital Gains Tax comes into effect for a Seller when the primary residence is sold for more than R2 million and the difference between the sale price ( above 2 million ) and R2 million are subject to CGT . The CGT applies purely to the profit incurred through the process of the sale .
Company A company is generally registered as a PTY and can purchase immovable property . The company will be susceptible to pay transfer duty at the same rate as a natural person . The difference is that no transfer duty is payable by the seller if they are registered for VAT and the property is used for the purpose of the operation of the business . If the property is sold as a going concern ( eg a guest house ) then the deed of sale must contain certain and very specific provisions and may be zero-rated VAT . This means that no transfer duty or VAT is payable .
A private company will pay a comparably more CGT , with an inclusion rate of 50 %, and an income tax rate of 28 %, which translates into an effective CGT rate of 14 %. The reason being is that a company is not a person who can pass away , no estate duty is payable . However , if someone is a shareholder of the company , the value of the shares and the loan account are deemed as assets in their estate and the value as verified by the company ’ s accountant , together with any amount owing by way of loan account , will increase the value of the estate . Also , a 10 % secondary tax on companies ( STC ) of 10 % is levied on all profits distributed in the form of dividends . A benefit of owning property through a private company is that this type of ownership can accommodate up to 50 shareholders , which includes private individuals , trusts , and companies . The company is a separate legal entity , where there is some protection afforded to shareholder ’ s assets , which can only be attached to cover debts incurred by the company if the individual has stood surety for the company .
Handy Tips
· Know what your specific benefits are and what type of ownership meets your requirements
· Always seek counsel for Tax , Real Estate and Legal requirements .
For more advice on property options and the due process of buying , selling and investing …
Contact us on ...
Luke 18:27 “ But He said , " The things that are impossible with people are possible with God ."
Team Talk
Property Talk By Marc van Heerden
The Four Types of Property Owners — Part 1
Many people are not aware , but there are 4 types of property ownership in South Africa . They are natural person , a company , a corporation or as a trust .
Natural Person This is the most common ownership and refers to buying a home and having it registered in your name . The benefit is some relief on the transfer duty which is guided by the 2017 Budget . Properties up to R900 000 are exempt from transfer duties . Properties between R900 001 to R1,25 million pay 3 % on the value above R900 001 . The sliding scale continues to peak of 13 % on properties exceeding R10 million .
Capital Gains Tax comes into effect for a Seller when the primary residence is sold for more than R2 million and the difference between the sale price ( above 2 million ) and R2 million are subject to CGT . The CGT applies purely to the profit incurred through the process of the sale .
Company A company is generally registered as a PTY and can purchase immovable property . The company will be susceptible to pay transfer duty at the same rate as a natural person . The difference is that no transfer duty is payable by the seller if they are registered for VAT and the property is used for the purpose of the operation of the business . If the property is sold as a going concern ( eg a guest house ) then the deed of sale must contain certain and very specific provisions and may be zero-rated VAT . This means that no transfer duty or VAT is payable .
A private company will pay a comparably more CGT , with an inclusion rate of 50 %, and an income tax rate of 28 %, which translates into an effective CGT rate of 14 %. The reason being is that a company is not a person who can pass away , no estate duty is payable . However , if someone is a shareholder of the company , the value of the shares and the loan account are deemed as assets in their estate and the value as verified by the company ’ s accountant , together with any amount owing by way of loan account , will increase the value of the estate . Also , a 10 % secondary tax on companies ( STC ) of 10 % is levied on all profits distributed in the form of dividends . A benefit of owning property through a private company is that this type of ownership can accommodate up to 50 shareholders , which includes private individuals , trusts , and companies . The company is a separate legal entity , where there is some protection afforded to shareholder ’ s assets , which can only be attached to cover debts incurred by the company if the individual has stood surety for the company .
Handy Tips
· Know what your specific benefits are and what type of ownership meets your requirements
· Always seek counsel for Tax , Real Estate and Legal requirements .
For more advice on property options and the due process of buying , selling and investing …
Contact us on ...
Marc van Heerden Cell : 073 198 9369 Tel : 041 360 0365 marcv @ sothebysrealtype . co . za www . sothebysrealty . co . za Each office is independently owned and operated
Luke 18:27 “ But He said , " The things that are impossible with people are possible with God ."
34