select
|

What you need to know about SARS tax amnesty

Those planning to take advantage of the South African Revenue Service's (SARS's) amnesty to transfer their primary residence from a company, trust or closed corporation (CC) into their own name might have to pay an higher interest rate on their home loan.

Individuals whose sole asset in a company, trust or CC is their primary residence can transfer their property into their own name without having to pay capital gains tax (CGT), transfer duty and secondary tax on companies (STC) until December 31 2012. This is a huge tax saving of just under 22%.

However, if the company, CC or trust has registered a bond over the property, the bond would need to be cancelled and possibly refinanced in the name of the natural person.

Magnus Heystuck from Brenthurst Wealth Management warns that banks do not always refinance "these loans at the same interest rate as before. Many if not most of these properties received bonds at prime minus 2% years ago and before the NCA ( National Credit Act) came into being.

"Many people are reluctant to refinance as they will end up paying substantially more in interest and in some cases might not even qualify for a new loan in terms of the strict criteria used by the banks nowadays".

The NCA aims to prevent reckless lending, over-indebtedness and unfavourable lending practices.

Both Nedbank and First National Bank told Moneyweb, loans will only be adjusted if the risk profile of the person transferring the property into their own name has changed.

Pat Lamont, general manager for sales and customer service, Nedbank Home Loans, said "Nedbank Home Loans does not re-price the home loan if the client's risk profile remains the same. Should the borrowing parties change through the process, this will result in a new loan which will be priced according to the new risk factors."

Lamont says if you were the owner of the trust, company or CC that holds the property and then transferred it to your own name that would not be considered a change in borrowing parties, but if you held the trust, company or CC with your spouse and have since divorced and you transfer the property into either of your names that would be a change in borrowing parties.

Wimpie Potgieter, head of operational credit at FNB Home Loans, says "our existing credit agreement is in the name of the juristic entity [or borrowing party]. When customers apply we issue a new NCA credit agreement on the individual based on their current risk profile.
"The current risk profile of the individual may differ substantially from the time of granting the initial loan in the name of the juristic entity. Based on the changes in the consumer's profile and the changes in the bank's risk appetite, cost of funding structures we will negotiate credit and rate.

"Other aspects to consider are: customers often require an increase on the current outstanding capital amount, a term extension, changed jobs etc. The dynamics and risk, of the first agreement in the name of the juristic entity, would change".

Ben Strauss, director of tax and Rekha Jaga, director, real estate at Cliffe Dekker Hofmeyr also warn that:
  • The law does not provide for relief from donations tax. So, be very careful when implementing the transaction to make sure that donations tax does not arise.
  • The transfer of the property to the natural person may have estate duty implications for the natural person as the value of her estate may be increased.
  • If there are loans owing by or to the company, CC or trust these would need to be settled, otherwise the relevant creditor may suffer CGT or income tax if the loans are simply written off.
  • The relief does not apply to assets other than residential immovable property eg, commercial immovable property, golf memberships and motor vehicles.
  • You need to think carefully about what the underlying cause for the disposal will be eg will it be a sale or a distribution?
  • You will need to pay conveyancing fees and charges to transfer the property.



  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK