Weigh up purchasing options first on 2008-09-26 | 10-18 | CyberProp"EN-GB" xml:lang="EN-GB">Weigh up purchasing options first on 2008-09-26 | 10-18 | CyberProp" />
Weigh up purchasing options first

Buying a property as an individual is the simplest and cheapest method but a
growing number of people are opting to purchase a property in other legal
entities due to the greater protection offered.

However they should tread carefully and consider the pros and cons -particularly involving tax - of each type of entity before deciding which best suits their needs.

"Buying in your personal capacity involves a simple registration process and negates the added administration of operating a legal entity, which may involve auditors, financial statements and resolutions. Another bonus is that transfer duty is charged at a lower rate. The downside, however, is that the property will form part of the individual's estate and will be available to creditors in the event of insolvency."

Furthermore, if the individual is married in community of property, the property will form part of the joint estate of the couple and therefore will be available to creditors who take action against either spouse.

As an individual, you may be able to qualify for capital gains tax exceptions on the sale of the property and a rebate if it is used as their primary residence. On the other hand, on the death of the individual owner the property will form part of their deceased estate and will be subject to estate duty.

There is no difference between purchasing a property in the name of a close corporation or a company except that it is generally cheaper and simpler to form and administer a close corporation than it is a company. In addition, the property does not form part of the individual's estate but rather is an asset of the legal entity, therefore creditors may not take legal action against the individual unless he or she was asked to stand surety.

However, transfer duty will be charged at a higher rate of 8% and will also be charged on the sale of shares or members interest if the company/close corporation is a residential property company, namely, one which owns residential property where the value of the property is more than 50% of the aggregate value of all the company's assets.

Prospective purchaser should also note that the property will be taxed at a higher rate than that of individuals, as will Capital gains tax, and there are no rebates on the sale of the property.

On the death of the shareholder/member the property does not fall into their estate but rather their share/interest in the entity, which will then be subject to estate duty.







Sonja de Bruin

Executive Consultant

Tel: 011 432 1783 
Fax: 011 432 1784
Cell: 082 925 5096
Web: www.colliersresidential.co.za

Aticle from: www.iafrica.com