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South African Law
does not prohibit a foreigner from purchasing
immovable property in the Republic of South
Africa. Foreigners are furthermore permitted to
sell the property at any time and repatriate the
original capital expended plus their profit at
such time of their choosing. In as much as South
African residents {natural persons or legal
entities whose normal place of residence,
domicile or registration is within the Republic
of South Africa} are subject to certain exchange
controls, foreigners are required at the time of
wishing to repatriate their funds, to establish
that the funds initially utilized for purchasing
the property were imported into the Republic at
the time of purchase from foreign sources { the
purpose being to ensure that no South African
resident/citizen is trying to expatriate funds}.
This is best achieved by opening a special,
"non-resident" bank account with a South African
commercial institution and ensuring that all
funds expended for purposes of the property
investment, travel through the account. The
opening of this account is however not a
prerequisite to the purchase of the property. In
such circumstances the funds would be remitted
directly to the conveyancing attorneys appointed
to attend to the registration of the transfer of
ownership of the property purchased who will, if
requested, because the title deed issued to the
foreign investor to be endorsed by the
attorneys' own bankers, and thereby facilitate
the repatriation of the funds when required.
This "endorsement" will serve as proof that the
purchase price of the property was paid with
imported funds. Foreigners are furthermore
permitted to borrow funds from a South African
financial institution and permit the
registration of a mortgage over the property
purchased as due security for such loan. The
South African laws however restrict the capacity
of foreigners to procure such a loan to a sum
amounting to a maximum of 50% of the proposed
purchase price of the property.
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Much has been made
of the "new" regulations promulgated in terms of
the "new" Immigration Act.
Lest the publication because unnecessary anxiety
in the minds of foreign investors, it is
important to stress that the new laws do not
change the existing laws relating to the right
of a foreigner to purchase immovable property in
the Republic of South Africa. In this regard our
own publication on "Foreigners Rights to own
Property in South Africa" remains entirely
correct and is an accurate representation of the
law as it stands. There is also no indication
whatsoever from any government authority that
any change to the above position is proposed or
contemplated.
The "New Regulations Act" deals entirely with
the right of foreigners to reside in the
Republic of South Africa whether on a permanent
or temporary basis and are therefore relevant
only insofar as they might affect the right of
the foreign investor to enter South Africa for
purposes of using his property.
The majority of foreigners wishing to purchase
property in South Africa fall within the
following four categories and we shall
accordingly restrict our commentary on the New
Regulations and Act to the impact they might
have on such foreigners: |
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There has been no
significant change in the Law affecting
investors of this nature. Such investors
traditionally qualified for entry into Republic
on the basis of a "visitors permit". This
situation has not changed and there is no reason
to believe that it will change. A visitors
permit is granted for a period of three months
and can be renewed by the Department of Home
Affairs if required. |
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Changes have
occurred which affect investors of this nature.
The permit that such an investor would wish to
acquire is entitled a "retired person permit" {
whether permanent or temporary} . The permanent
permit is of course valid for an indefinite
period. A temporary permit is valid for a period
of four years at a time and will be renewed by
the Department if the investor continues to
qualify in terms of the prescribed criteria. The
temporary permit is specifically capable of
dealing with investors who wish only to remain
in the Republic for limited or seasonal periods
during the validity of the permit. The criteria
for qualification for the permits are that the
investor must be able to establish that he has a
pension {or retirement annuity or retirement
account} producing a minimum income of R20
000.00 per month or that the net worth of the
investor is R12 million producing an income of
at least R15 000.00 per month. |
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The particular
permit which such an investor would require is a
"business permit" {whether temporary or
permanent}. A permanent permit would endure
indefinitely if, for a total period of five
years after its issue, the investor continues to
meet the criteria for qualification. A temporary
permit is valid for two years at a time and can
be renewed as long ass the investor continues to
meet the criteria for qualification. The
criteria for qualification {for both permanent
and temporary permits} are that the investors
must invest at least R2.5 million in a business
and must {amongst other prescribed alternatives}
have either a proven entrepreneurial skill or
prove that at least five citizens or residents
will be employed by the business or prove that
the business is one which will ope4rate in one
of the listed sectors of the economy {example -
information and communication technology,
clothing and textiles, tourism or crafts}.
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A temporary permit
would be given to any foreigner if the foreigner
is "immediate family" of any South African
citizen or permanent resident provided that the
South African citizen or resident establishes
certain prescribed financial assurance relating
to the care for such foreigner. "Immediate
family" includes the South African citizens /
residents children, grandchildren, parents,
brothers and sisters. Children and parents in
fact qualify for permanent residence on the same
criteria. |
The above summary
hopefully makes it clear that our immigration
laws are still very "Foreign investor" friendly
and that such persons will continue to feel
comfortable about investing in our thriving
property market.
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South Africa is
rightly proud of the fact that it conducts a
first-world property registration system which
ensures that the ownership of property is both
secure and guaranteed. All property which is
capable of private ownership is recorded in the
offices of the Surveyor-General {For purposes of
physical identification} and in the offices of
the Registrar of Deeds {for purposes of
verification of ownership, mortgage registration
and title conditions}. Only specially qualified
South African attorneys which have been admitted
as property conveyancers are permitted to
interact with the Deeds Registries with a view
to causing ownership of property to be passed
from seller to buyer. The entire process is
strongly regulated with many checks and
balances. The system therefore enables an
investor to know with confidence the exact
property which he will own, the nature and
extent of the title deed conditions relating
thereto and that his deed of ownership is valid.
The process of purchasing a property in South
Africa commences with the submission by the
purchaser to the seller of a written offer to
purchase the property which offer is required to
comprehensively set out the terms upon which the
purchaser is willing to acquire the property. It
is established practice for estate agents
registered in terms of the estate agency laws of
the Republic of South Africa to assist
purchasers in the preparation of this offer. The
offer is furthermore required by South African
law to be in writing, failing which the
acceptance thereof will have no legal
consequence and no binding contract will occur.
Should the seller find the written offer, a
final and binding contract comes into being
between the purchaser and the seller and neither
party may thereafter without consequence escape
the terms of the contract unless the contract
otherwise specifically provides.
The contact at this point is handed to
conveyancing attorneys appointed by the seller
who will proceed with the formal process of the
conveying ownership of the property from the
seller to the purchaser and who will at the end
of the process deliver the purchaser's title
deed to him.
Once transfer of ownership of the property is
recorded in the Deeds Registry, the purchaser
has full rights of ownership and can deal with
the property as he sees fit subject only to such
restrictions as might appear within the title
deed to the property or the restrictions of the
municipal zoning scheme. Zoning schemes
constitute a set of rules and regulations which
regulate the use of any property within a
particular area for the mutual benefit of all.
The owner is according permitted to let the
property to any tenant and recover rental
income. This rental income would however be
subject to the tax regime of the Republic of
South Africa and after payment of this tax the
rental is also permitted to be repatriated. As
with all owners of immovable property, the owner
will be required on a monthly basis to pay
municipal rates, taxes and services charges to
the municipal authority having jurisdiction over
the area in which the property is situated.
These payments cumulatively made by all property
owners effectively fund the affairs of the
municipal authority and the services which
provides. Owners will accordingly have to make
arrangements of a practical nature to ensure
that payment is timeously effected.
On resale of the property purchased the owner
will be liable for the standard Capital Gains
Tax applicable to all South Africans on the
profit made on the property investment. For
human beings this tax would effectively amount
to approximately 10.5% of the total profit made
and is accordingly not a significantly onerous
tax. |
