A growing number of non-South African residents are investing in property in South Africa. They live in their home countries (which makes then 'non-resident' for South African tax and exchange control purposes), and use local estate agencies to handle their transactions for them. There are also South Africans who emigrate, but leave properties behind: after a certain period of time, they too acquire 'non-resident' status. You should know the following key points about transactions involving non-residents.
As from 7 April 2003 the Immigration Act and Regulations came into being in South Africa, which replaced the Aliens Control Act.
According to the Act, the following temporary residence permits are granted:
Visitors Permit: Unless visitors are from Great Britain, Northern Ireland or Australia, they will need to obtain visas in their home countries prior to arrival in South Africa.
Retired persons permit: Retired persons are able to apply for a 4 year permit if they are able to prove a monthly pension or retirement account with a value of R 20 000, 00 alternatively, a R12 000 000,000 net worth with a monthly income of R15 000,00. At present it is ambiguous whether this requirement applies to both retired spouses but the practice rule would seem to be that this is considered sufficient for a joint income. This is however open to dispute.
Business permit: This permit is valid for 2 year and for which the applicant must show a minimum of R2 500 000,00 capital investment which can however be reduced or waived. It is further necessary for the applicant to fulfill one other criterion such as employment of South Africans, alternatively investment in a sought after business in South Africa.
Relatives permit: An immediate family member of a South African citizen or permanent resident may obtain a relatives permit should he or she not desire to obtain employment in the country and subject to the South African relative providing an undertaking to support the applicant financially.
Work permit: The South African employer will need to prove that there is no South African resident able to take the position, that the position has been advertised and that the employer is willing to pay 2% training fee. Alternatively the applicant may prove exceptional skills or qualifications or obtain an intra-company transfer.
The Act makes provision for the following permanent residence permits:
Financially independent: If the foreigner is able to prove a net worth of R 20 000 000,00 and is willing to pay an application fee of R100 000,00 he or she will qualify for permanent residence in the financial category which will enable him or her to work or partake in any other activities.
Spouse: All spouses of South African citizens or permanent residents will also be able to obtain permanent residents, which will include same sex and heterosexual life partners.
Work permit: Any offer of permanent employment in South Africa will result in permanent residency if the Department of Labour certifies and endorses the application, after it has been duly advertised.
Retired persons permit: Based on an irrevocable retirement income or pension accruing to the foreigner for the rest of his or her life, he or she will qualify for permanent residency, if he meets the financial criteria.
Buying property in SA as non-resident
Under current regulations, the non-resident may pay for his property only with funds, which are (a) introduced from abroad, or (b) paid from a local non-resident bank account. If he needs a home loan from a South African institution, his maximum bond is 50%, and he needs prior exchange control approval.
His application for exchange control approval must be supported by the following documents:
- A copy of the offer to purchase or agreement of sale
- Confirmation that he is a non-resident
- The period over which the loan will be repaidHow he will service the loan: from non-resident funds held in South Africa, from
funds transferred in from abroad, or from rental income.
The overseas purchaser has to appoint a South African domicilium address or provide for service or legal notices by way of fax. If the non-South African resident is purchasing the property from overseas, the Agreement of Sale can be signed in his/her own country and faxed back to South Africa, in the case of a cash transaction. It becomes more tricky if the purchaser is registering a bond. Bond documents would have to be signed overseas at the South African Embassy or before a Notary Public. If signed before a Notary Public, in certain countries that Notary Publics signature must in turn be verified by the relevant authority in that country. This whole procedure often causes delays. Furthermore, signing the documents before a Notary Public is quite costly. The SA Embassy is often too far away from where that person resides and even if it is close enough, it can be a couple of weeks before they can get an appointment. The documents then have to be sent back to South Africa by courier which is yet another expense.
Once the property has been registered and the title deed has been issued, the bank must endorse it with the words "Non-Resident". This is very important, as it ensures that, when the non-resident sells the property in the future, he will be able to transfer the proceeds out of the country.
Selling property in SA as non-resident
Where a seller and/or purchaser are in the country when the Sale is concluded and then goes back overseas, it is advisable to obtain a Special or General Power of Attorney at the time of sale in terms whereof they appoint someone in the country to sign the transfer and/or bond documents on their behalf. It is best if the General or Special Power of Attorney is prepared by the conveyancer as it must comply with Deeds office requirements.
If the non-resident wants to be able to transfer the proceeds of his property sale out of South Africa to his home country (or wherever), he needs to maintain his legal status as a non-resident.
When the non-resident disposes of the property, and has paid off the balance of his home loan, he may transfer the entire net proceeds, including capital profits, out of the country. Alternatively, if he wishes, he can credit them to a non-resident account with an authorised bank, for further investment.
Please note: We have compiled this information in good faith, but we accept no liability for any errors, or for any use that is made of it, or for any problems or damage that may arise as a result of using or acting upon this information.
