The Tax - Situation in South Africa

South Africa uses a residence based tax system, i.e. you must be a resident before your income here will be taxed, except for one exclusion, and that is, if you operate a business in South Africa you will be taxed on the profit as a local business would be taxed.

The income you earn in the form of interest is free of tax, so with interest rates of 9% on 2-3 month call accounts being achievable, South Africa is looking good for foreign investors who have at least €150 000 or more to invest. An initial handling fee of 2% is charged but there are no further costs thereafter.

The funds can be freely repatriated to their source should you wish to withdraw your investment at any time.  The transfer is handled by the bank who will do an overnight transfer to your bank account overseas.

South Africa, like most Western countries have certain red tape in place to prevent money laundering.  To this end any investor, like any resident, will have to provide  copy of his passport or identity document and a copy of a municipal account or tax form substantiating his/her residential address to the bank when making the initial investment.

Taking the current exchange rate into consideration, foreigners can make excellent property acquisitions at about a 9^th of the price if they are in the Euro monetary system, at a 7^th of the price if they are in the US$ currency market and at a 13^th  of the price if they are into Sterling.  There has been very good growth in the property market and during the past two years capital growth in excess of 120% has been achieved.

What some foreign nationals do is purchase a property in KwaZulu Natal where they spend the South African winter – temperatures in this province being a comfortable 16-20 Celsius during winter and then return home for their country’s summer season, thereby missing out on inclement weather. What some do is live in South Africa for six month while a friend lives in their overseas home while they are away.  When they return the friend then moves to their South African property and spent half the year there.  In this way the person living in the house pays all the bills while in residence and has the luxury of being able to alternate between two destinations never having to worry about leaving their property either abroad or in South Africa vacant and open to the whims of thieves.

For any information on taxation and investment matters readers are welcome to contract the writer at any time.

Sonja Wunder,  Andalusische Impressionen S.L. and Trevor Labuschagne, South Africa
B Com, M.Com (tax), Dip Mkt M, PNA (Aus), Appraiser
Professional Accountant (SA)

E-Mail: info@andalusische-impressionen.com