Team Talk
Property Talk
By Marc van Heerden
The Four Types of Property Owners—Part 2
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.
Purchasing a property as a close corporation
While the introduction of the Companies Act of 2008 phased out many close corporations, existing
close corporations could elect to continue to exist until deregistered, dissolved or converted into a
private company governed under the new Companies Act. Close corporations face the same transfer
duty, CGT and tax implications as companies. As with a company, a close corporation is a separate
legal entity. The difference between buying in a close corporation and a company, is that close
corporations are governed by the Close Corporations Act 69/1984, they are managed by members,
ownership is restricted to a maximum of 10 natural persons and the financial statements must be
prepared by an accounting officer: There is no need to provide audited financials, which greatly brings
down the administration fees. While another close corporation or company cannot be a member of a
close corporation, a trust can be registered as a member of a close corporation.
Purchasing property through a trust
A trust is established by a founder or settlor, trustees, and beneficiaries. The person that creates the
trust is referred to as the founder or settlor. They will appoint trustees in terms of the Trust Deed
who will manage the affairs of the trust for the benefit of the beneficiaries that are named in terms
thereof. A property held within a trust will not form a part of an individual’s estate when they pass
away, which means that the estate will benefit from estate duty savings. Another benefit is that since it
is a separate legal entity, the property held within the trust is protected from being attached by
creditors of the beneficiaries, which provides a safe option to protect assets. Other benefits include the
fact that there are no executor fees when the owner dies, as there is no need to transfer the property
into the name of their heir. All repairs and maintenance, as well as other bills such as water and rates,
will be for the trust’s account. The downside is that a trust attracts the highest rate of CGT, with an
inclusion rate of 50%, and income tax rate of 40%, meaning an effective CGT rate of 20%. Another
con is that the founder does not have control over the property, as the trust will be the legal owner of
the property and the trustees will have the power to administer it. If finance is required to purchase
the property, banks are less likely to grant a full bond to a trust and might be higher deposit
requirements.
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
[email protected]
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."
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