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tax388 ch21.5 withholding tax on immovable property summary
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this is a summary on the work covered in ch21.5 in the SILKE: South African Income Tax textbook as well as extra notes from the lectures
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ch21.5 withholding tax on immovable propertySunday, 17 March 2024 18:40
21.3.5. source of amounts derived from the disposal of assets [SILKE p.869] [ignore exchange differences]
→ section 9(2)(j)
immovable fixed property is located in south africa :. south african source
interest in immovable fixed property more than 80% rule [ch17 capital gains tax]
→ section 9(2)(k)(i): disposal by resident
if assets disposed of is movable property
▫ the asset is not effectively connected to a permanent establishment outside south africa &
▫ the proceeds from the disposal of that asset are not subject to tax on income in any foreign company
→ section 9(2)(k)(ii): disposal by non-resident
if assets disposed of is movable property
▫ the source of the amounts derived from the disposal is in south africa only if asset is effectively connected to a
permanent establishment of the non-resident in south africa
→ the rules to determine the source of exchange differences on exchange items mirror the source rules that apply to amounts
derived from the disposal of movable property :. section 9(4)(d)
21.5.1. overview of tax liability & obligations
the south african tax can be either normal tax, or withholding tax.
- non-residents are only liable to tax on capital gains that arise from the disposal of:
• immovable property situated in south africa,
• an interest or right to or in immovable property situated in south africa, or,
• an asset that is effectively connected with a permanent establishment in south africa
- a non-resident must register as a tp for income tax purposes becoming liable for normal tax, or to submit an income return.
the following non-residents must submit income tax returns:
• every non-resident that is a company, trust or other juristic person which
○ carried on a trade through a permanent establishment in south africa,
○ derived income from a source in south africa, or,
○ derived any capital gain, or capital loss from the disposal of assets to which the 8th schedule applies
• every company incorporated, established, or formed in south africa, which is not a resident as a result of the application
of a tax treaty
• every natural person who is not a resident & who carried on a trade, other than solely as an employee in south africa
• every natural person, incl. non-residents, whose gross income exceeded the tax threshold
• every natural person who is not a resident & who derived any capital gain, or capital loss from the disposal of assets to
which the 8th schedule applies
• every non-resident whose gross income incl. interest from a south african source
- natural persons who were non-residents throughout the yoa & whose gross income consisted solely of dividends do not have
to submit returns
- non-residents may also be parties to reportable arrangements incl. specific reportable transactions that involve foreign
trusts, foreign insurers & foreign service providers
21.5.2. withholding taxes [SILKE p.888]
- withholding taxes are generally imposed on passive income that does not require the presence of the person in the country.
south africa imposes withholding taxes on the following sources of income of a non -resident:
• proceeds paid to non-resident sellers i.r.o. immovable property disposed of
• interest
- dividends paid by south african resident companies are subject to dividends tax & it is also withholding tax when dividends
are paid in cash
- remuneration paid to any employee, whether a resident, or non-resident, may be subject to employee's tax & this is another
form of withholding tax that serves as an advance payment of the employee's normal tax liability
21.5.2.1. basic calculation of amount to be withheld [SILKE p.891]
the amount of withholding tax is calc. by applying a rate to the gross amount of the transaction. no deductions are allowed from this
amount. this tax is imposed on income as opposed to the profit or gain realised on the transaction. the following table summarises
the rates & amounts to which the rate should be applied:
withholding rate amount to which the rate is applied
tax regime
immovable depends on the nature of the non-resident seller of the immovable property: amount payable i.r.o. the disposal of
property ❖ 7.5% of proceeds if the seller is a natural person immovable property in south africa
❖ 10% of proceeds if the seller is a company
❖ 15% of proceeds if the seller is a trust
- non-resident [seller] sells immovable property, or interest in immovable property situated in south africa [section 9(2)(j) :. a
ch21.5 Page 1
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