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February 2009

This is the first article specifically written under the practice of Tshabalala Attorneys and I believe that whilst it is important to write about new developments, it is also important to remind ourselves about some of our statutes and their implications to our businesses. This approach will also be useful to those who may not have been aware of the issues dealt with in my articles.

The basis of this article is Section 35A of the Income Tax Act. This section was enacted into law on 1 September 2007 and its purpose it to secure the tax liability of certain non-resident sellers of immovable property in respect of the assessment year during which the immovable is sold. Section 35A (1) states that:

“ Any person(hereinafter referred to as “the purchaser”) who must pay any amount to any other person who is not a resident (hereinafter referred to as “the seller”), or to any other person for or on behalf that seller, in respect of the disposal by that seller of any immovable property in the Republic must, subject to subsection

(2), withhold fromthe amount which that person must so pay, an amount equal to:
(a) 5 percent of the amount payable, in the case where the seller is a natural person;
(b) 7,5 percent of the amount so payable, in the case where the seller is company; and
(c) 10 per cent of the amount so payable, in the case where the seller is a trust.

The section makes provision for the seller to apply to SARS for a directive that no amount be withheld, subject to satisfying SARS’ requirements. I am not going to deal with what those requirements are, since each application is considered on its own merit and after having regard to certain factors.

The amount withheld must be paid to SARS (in case where the purchaser is a resident, within 14 days from the date on which that amount is withheld and in the case where the purchaser is non – resident, within 28 days).

The section further creates a certain obligation on the following parties:

1. The Purchaser who knew or should reasonably have known that the seller is a non resident and fails to withhold the amount required;

1.1 The above purchaser will be personally liable for the payment which he/she failed to withhold; and

1.2 Must pay the amount within the period stated above, failing which, such purchaser will in addition to the payment required, also be liable for a penalty equal to 10 % of the amount required by SARS.


2. The Estate Agent and the Conveyancer involved or who assist with the disposal of the immovable property and fails to notify the purchaser in writing, of the fact that a certain amount ought to be retained.

2.1 The Estate Agent or Conveyancer who falls into this category, will be jointly and severally liable for payment of the amount which the purchaser is required to withhold, limited to the amount of the remuneration or other payment in respect of services rendered by such Estate Agent or Conveyancer in connection with the disposal of the immovable property.

The Section only applies to the deals where the purchase price exceeds R 2Million and does not apply to certain deposits. The Commissioner also hasdiscretion in respect of each matter. I am certain that all the prospective sellers (non – resident), purchasers, estate agents and conveyancers will appreciate the possible consequences which may result in the event that this section is not adhered to and SARS elects to enforce it.

It is also clear that this section hits exactly where it hurts most (i.e the pocket of the purchaser, estate agent and conveyancer).

This article is written simply for the purposes of making the readers aware of certain provisions of the above Act and does not in any way serve as an advice to any reader and in the event that any person requires advice on the above, you may contact us or consult your attorney.

Tirhani Reginald Tshabalala


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