Can I purchase a property if my tax is not up-to-date? | Legal Articles


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Can I purchase a property if my tax is not up-to-date?

Can my property sales commission be confiscated?

When purchasing a property in South Africa it is important to make sure that your tax is up-to-date. 

South African Revenue Service

This is definitely a sore point for many who question why they should hand over the money they worked hard for to the tax man. 

Property Transaction Taxes

Many individuals may feel overwhelmed by the amount of taxes that go hand in hand with any South African property transaction. 

Such people or businesses will be met with difficulties and repercussions if they haven’t registered for tax, or have amounts outstanding.

Unregistered taxpayers are being exposed by the legislation that the South African Revenue Service have put in place.

You must be registered for income tax 

This requires both the sellers and purchasers in a property transaction to be registered for income tax. 

As part of the sales process, both parties will also have to fill in a transfer duty declaration. A majority of sellers and buyers are truly unaware of the effects that unsettled tax issues can impose on their property transaction. 

SARS utilise property transfers as a means of ensuring that all parties involved are compliant with all the taxes that are imposed upon them. 

If the sellers or buyers haven’t met their tax obligations, the transfer process could be delayed by SARS until the issues have be resolved. 

It is interesting to note that SARS also use this process to ensure that real estate agents are also compliant with their tax obligations, whether acting as an individual or business. 

However, the tax status of the estate agent won’t cause a delay in the sale.

Property Transfer Process may be delayed 

The seller and buyer are given the chance to resolve their tax issues before they will have to deal with any repercussions. However, the resolving of these issues could result in the transfer process being delayed. 

If it is a large property transaction, then the seller could end up losing a large amount of interest on the purchase price of the property.

If left unresolved, SARS will withhold the Transfer Duty receipt until they have put in place steps to ensure that the issues could be rectified which results in the sale of the property further being delayed. 

SARS will usually appoint a conveyancer to handle the sale of a property. The conveyancer will act as an agent on their behalf who will be required to obtain the amounts owed from the proceeds of the sale. 

Sales Commission Confiscated

If the estate agent is owing tax to SARS, then the Receiver of Revenue will confiscate the commission so as to pay for the outstanding tax amounts. 

Although this method is only used for tax recovery from sellers and estate agents who receive money from a sale. 

Transfer Duty Declaration

When submitting the transfer duty declaration all parties involved need to include an income tax and VAT number (if applicable). In order to purchase an immovable property, the buyer will need to be a registered taxpayer. 

This is where the buyer is checked for compliance, and usually if said person registers for the first time with a large transaction of property on the horizon then alarm bells will start ticking. 

SARS might then decide to investigate the origins of the undeclared income that made it possible for the buyer to purchase the property. 

This could take a long time to complete and may also lead to serious financial repercussions if the individual had been evading the payment of tax for several years.

Tax Warrantee Clause 

It is generally recommended for a tax warrantee clause to be included in and Agreement of Sale so as to ensure the protection of purchasers or sellers when the other party is the cause of the delay. 

This clause requires for all tax obligations to be met and up to date. Any party who fails to do so and is found out later on in the process, then said party will be liable for legal ramifications.

Van Deventer & Van Deventer Incorporated - Conveyancers Rivonia

The buying and selling of property is usually a relatively easy process for those who are informed and are up to date with their tax. 

However, legal issues and delays could become a problem for those who go about purchasing a property unprepared and ill-informed about all that is involved. 

That is why it is necessary to employ the services of a professional who can advise you on everything that you need and on the best way going forward. 

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