Tax and SARS knowledge base
When must a buyer withhold tax from a non-resident property seller?
When must a purchaser withhold tax from a non-resident property seller?
Last reviewed:
Direct answer
A purchaser must consider the section 35A withholding rules when paying a non-resident seller for immovable property in South Africa. SARS says the rules do not apply if the aggregate amounts payable by the purchaser to the seller and any person for or on behalf of the seller do not exceed R2 million. If the property value exceeds R2 million, the published withholding is calculated on the full purchase price, not only the amount above R2 million.
The SARS guide states published rates of 7.5% for a natural-person seller, 10% for a company and 15% for a trust. The amount withheld is an advance payment toward the seller's normal-tax liability for the year of disposal. It is not automatically the seller's final tax. A SARS directive can reduce or remove the amount that must be withheld in stated circumstances.
What this means in practice
This is a transaction control to address a possible collection risk where a seller is non-resident. It is not an optional buyer-side estimate. The buyer, conveyancer and estate agent should identify the seller's residency position early in the sale process, not after the payment schedule is fixed. A seller's nationality, address or passport alone may not settle the legal tax-residency position, so preserve the seller's representation and obtain appropriate professional input.
The R2 million test concerns aggregate amounts payable for the acquisition. Do not assume that splitting deposits, payments or parties changes the threshold. SARS says that where the value exceeds R2 million, the withholding applies to the full price. SARS also notes a special deposit rule: a deposit paid to secure a disposal before the agreement becomes unconditional is not subject to withholding at that stage, but the amount that would have been withheld from it must be withheld from the first following payment after the agreement becomes unconditional.
Step-by-step
- Raise the seller's residency status at mandate and again when the sale agreement is prepared. Record the information and tell the conveyancer promptly.
- Confirm that the asset is immovable property in South Africa and identify every amount payable to the seller or on the seller's behalf under the acquisition.
- Test the R2 million threshold using the aggregate amount payable. If it does not exceed R2 million, the section 35A withholding rule described by SARS does not apply. Keep the calculation in the transfer file.
- If the threshold is exceeded and the seller is non-resident, identify whether the seller is a natural person, company or trust. Apply the applicable published percentage to the full purchase price unless SARS issues a directive.
- Tell the seller about the option to apply for an NR03 directive. SARS says the directive application may be based on security for tax, whether the seller is subject to tax on the disposal, or whether actual tax liability is lower than the standard calculated withholding.
- Coordinate the NR03 and NR02 paperwork with the conveyancer. SARS says the seller or representative submits NR03, while the purchaser, conveyancer or estate agent submits NR02, with the deed of sale through the current SARS process.
- When applying for a Transfer Duty receipt, follow the SARS guide's instruction to answer the section 35A question and upload the applicable NR02 or NR03 and deed of sale.
- Keep the directive, payment evidence, sale agreement and correspondence. The seller should also be reminded to submit the relevant tax return for the year of disposal.
Documents and records to keep
- Sale agreement, property description and transfer timetable.
- Seller residency representation and identity or entity information.
- Purchase-price calculation and threshold analysis.
- NR03, NR02, deed of sale, directive and SARS correspondence.
- Proof of payment and transfer-duty submission records.
Important limits and exceptions
The withholding is an advance payment, not a substitute for the seller's tax return. SARS says that where the seller does not submit the return for the year within 12 months after the end of that year, the amount paid may be a sufficient basis for an assessment under the Tax Administration Act.
Do not decide residency or tax liability from a short article. The transaction may involve a trust, company, dual residence, instalments, security or a directive application. The parties should use a conveyancer and obtain tax advice before funds are released.
When to get tailored advice
Get advice immediately for a property sale over R2 million with a potentially non-resident seller, especially where the seller seeks an NR03 directive or there is uncertainty about residency, tax liability or the payment timetable.