Internal Publication: Conveyancing- Emigration

INTRODUCTION

When the decision is made to emigrate fromSouth Africaone of the issues that must be dealt with is the sale of immovable property.  There are a few important considerations that should be looked at when undertaking this task.

POWER OF ATTORNEY

Careful consideration should be given to whether or not to have a Power of Attorney drawn and signed for the purpose of facilitating the marketing and subsequent transfer of your immovable property in the Deeds Registry.

A Power of Attorney is a useful tool that can be used to enable a trusted individual to sign documents on your behalf inSouth Africawhile you are away or generally to contract on your behalf.  There are two types of Power of Attorney, the first being a General Power of Attorney (GPA) and the second being a Special Power of Attorney (SPA).  The first gives general power to act and the second limits the acts which can be undertaken, such as those related to a property transaction.

The Deeds Registry has a set of particular rules that apply to Powers of Attorneys and it is advisable to consult a Conveyancing Attorney to have this document drawn correctly so as to avoid the Deeds Registry rejecting the document as incorrect and unusable.

Should you as a Seller leaveSouth Africaand have to sign Deeds Office documents in a foreign country there are again particular rules that apply to the signing of such documents in a foreign country.  Depending on the country in which you need to sign the documents you may need to either sign the documents at a South African Embassy or before a Notary Public.

RATES REFUNDS

In order to transfer your immovable property a Rates Clearance Certificate (RCC) is required.  The City Council will claim rates and taxes, electricity and water 5 – 6 months in advance.   The law related to the RCC says that a RCC must be valid for a period of 120 days from the date of issue of the RCC by the City Council.

The conveyancers will not refund the Seller any funds on registration.  The conveyancers have been instructed by the City Council of Johannesburg not to refund the Seller for any amounts paid past the registration date.   After transfer the Purchaser of the property opens new accounts at the City Council and any refund due to the Seller in respect of any overpayment is generated by the City Council.  The City Council normally takes approximately 6 to 9 months to reconcile the Seller’s and Purchaser’s accounts and issue a refund cheque.

The refund cheque is made out to the Seller if so requested by the Seller in the Application for a Refund. The conveyancing Attorneys do not calculate the refund and are not advised as to how this is determined.  There are a variety of City Council Consultants who for a fee will expedite this refund process.

EMIGRATING AND CAPITAL GAINS TAX

South African Citizens who emigrate to live permanently overseas stop being local tax residents on the day they leave (even if they continue to hold a South African passport).  It is not possible to give an exhaustive explanation of the various implications of this, save to state that it is important to consider all the tax implications before leaving and to obtain professional advice.

The implications for normal income tax are simple as you will be taxed inSouth Africauntil you leave and then taxed in your new country when you arrive.

In regard to Capital Gains Tax (CGT) however the matter is more complex.  Paragraph 12(2)(a) of the Eighth Schedule to the Income Tax Act states that a person who ceases to be a resident of South Africa is deemed to have disposed of all of their assets as of the date of departure, irrespective of whether or not such assets were actually disposed of.  This applies to and includes all assets held worldwide as a result of our residence based system of taxation.

In other words when you leave, SARS considers you to have sold all your assets (even if you have not) and thus you become liable for (CGT) on the sale of those assets (whether or not you have actually sold them).  The assets are deemed to have been disposed of at market value.  The usual CGT rules will be applicable to this disposal of assets and will give rise to CGT on the difference between the market value and the base cost.

There are various exceptions to this deemed disposal, one of which is in regard to immovable property situated inSouth Africa.  The reason why immovable property is excluded from this deemed disposal is that this type of asset is subject to CGT irrespective of the residency status of the owner.

TAX CLEARANCE CERTIFICATE

In order to emigrate a Tax Clearance Certificate is needed from SARS.  In order to obtain a Tax Clearance Certificate a Form MP 336(b) declaring all assets, liabilities and personal details must be completed and handed to SARS.

ALLOWANCES

There are various exchange control rules and regulations that apply to the taking of funds out ofSouth Africa.  These exchange control rules and regulations are complex and the assistance of an Attorney or Tax Consultant is advisable.  It is possible to apply to the Reserve Bank to have the limits below increased and amended, however in general the following will apply:

 Cash Allowance:

  • R1 000 000.00 per adult over the age of 18 years and R200 000.00 per child.

 Foreign Capital allowance:

  • R4 000 000.00 per single unit or R8 000 000.00 per family unit

Household goods:

  • A Form N.E.P is required to be completed and attested by an Authorised Dealer for house hold, personal effects, motor vehicles, caravans, trailers, motorcycles, stamps and coins (excluding coins that are legal tender in the Republic), within the overall insured value of R2 million

These limitations are the values which may be transferred per year and as such, if you exceed these limits in the year of emigration, the balance may be taken over successive years.

CONCLUSION

The above article is not intended to be an exhaustive text on the issues that have been mentioned and discussed in this document.  When considering emigration it is advisable to assemble a professional team to advise and guide you through the process.  When dealing with immovable property this would include an Estate Agent, a Tax/Accounting Advisor and an Attorney.

 

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