THE BANKING COUNCIL SOUTH AFRICA
COMMENT IN RESPECT OF ANNEXURE 16 CGT WITHHOLDING: NON-RESIDENT SELLERS.
13 October 2004
Dear Ms Malumane
The Banking Council South Africa appreciates the opportunity to comment on the proposals as presented by SARS for public comment. The following comments are made in respect of Annexure 16.
Withholding of amounts from payments to non-resident sellers of immovable property.
The obligation placed upon the purchaser is suggested to be beyond that which a reasonable person should bear.
Firstly, the estate agents and the conveyancers are the primary processors of deeds of sale and registration of property title deeds. These professional people are best placed to execute the withholding requirements.
Secondly, in most sales and purchases, the purchaser is either fully bonded of utilizes the proceeds from another sale to raise the funds for the purchase. Withholding funds from the purchase price then becomes a financial burden.
Thirdly, the imposition of penalties on a purchaser is inequitable as the residency status of the seller will be unknown to the purchaser and this information can only be obtained from the estate agent or conveyancer. Any default by either of these parties should not compromise the purchaser.
It is also considered that payment of the purchase price for the property may not be settled in cash. Settlement, could for example, be effected in shares. These circumstances create difficulties for the parties concerned.
The administrative burden that a seller must bear to seek a directive or provide security for the CGT liability will discourage foreign investors from investing in immovable property in South Africa.
It is further suggested, in the interests of efficient administration, that sales in execution and under conditions of insolvency be excluded from the withholding requirements.
I hope that the points raised above are helpful, and may assist you with your deliberations of the Bill.
General Manager – Financial Markets