When Conveyancers Struggle to get Rates Clearance from Council

” K G Tserkezis Incorporated Attorneys will be taking pro-active approach to getting some joy out of City of Jo-burg with regards to applying and receiving rates clearance figures and certificates.

It is one of the first things that are applied for on the transfer of a property and often one of the last things to be received, substantially delaying the conveyance process.

Council is legally required to provide the conveyance attorneys with the rates clearance figures that are requested on the property to be transferred. K G T work according to the following procedure:

• Request rates clearance figures from the applicable Council;
• Follow up with the Council for a period of approx. 2 weeks;
• If K G T have not received them at this stage, they issue a summons to the Council for release of the figures required;
• The summons is then referred to the legal department of the Council;
• A court order is sought allowing the property to be transferred WITHOUT A RATES CLEARANCE CERTIFICATE if the Council fails to provide them with figures within 7 days of the issuing order.
• K G T usually receive the figures within 14 days of summons has been issued.

The issue of a summons to the City of Johannesburg leads to results and often reduces the turnaround time of a conveyancing transaction. This is a drastic measure, but is used when there is no other choice. ”

This article has been reprinted with the kind permission of KGT Incorporated.
082 803 8889

SA will be a ‘house on show’ for next month

With the start of the Soccer World Cup now just hours away, South Africa is looking just like a house for sale about to go on show – all polished up and freshly painted and ready for visitors.

“And, if the atmosphere at the warm-up games is anything to go by, those visitors – foreign teams and tourists alike – are going to have an absolutely wonderful time as they are treated to our famous hospitality,” says Berry Everitt, CEO of the Chas Everitt International property group.

“What is more, the excitement has already spread to other parts of the world. We have just returned from our annual convention, which this year took us to France and Spain, where we witnessed the keen and growing anticipation of the event first hand.

“So there is no doubt that we will have the opportunity to show off SA to millions more people than just those who can afford to visit – rather like advertising a home for sale on the Internet.

“And as we do that, I think we should all take a moment to also reflect on how far we’ve come as a country since 1994. With all our problems and setbacks and difficulties, the fact is that we have in just 16 years become a nation that is capable of hosting the biggest event in the world, and doing it with great style and flair.”

Writing in the Property Signposts newsletter, he says that getting the country ready for its big “show day” has also shown South Africans what great things they can achieve when they commit to the greater good – “and that’s the lesson we really need to hang on to after the final whistle has blown”.

Meanwhile, he says, locals should all do their best to “take visitors and viewers around the SA ‘show house’ with the warmth and good humour and wide welcome for which we’d like to become even more famous”.

Issued by Chas Everitt International
For further information call
Berry Everitt on
011 801 2500 or visit
www.chaseveritt.com

Capital Gains Tax Explained

Capital Gains Tax is a complicated tax that is not easy to explain. We will, however, attempt to keep this explanation as brief as possible. We have included a few illustrations to assist in our explanation.        

What is Capital Gains Tax? 
Capital Gains Tax is the tax that you pay on any profit you make on your assets when you sell or dispose of your assets in any way. You will therefore not pay any Capital Gains Tax on the full amount of the sale, but only on the profits. Profits accumulated before the date when Capital Gains came into effect are excluded.  

Why is Capital Gains Tax being introduced?
The absence of Capital Gains Tax (CGT) creates many distortions in the economy, by encouraging taxpayers to convert otherwise taxable income into tax-free Capital Gains. SARS has noticed that clever tax-payers have made use of these conversion transactions, which has eroded the corporate and individual income tax basis, reducing the efficiency and equity of the overall tax system. CGT therefore protects the integrity of the personal and corporate income tax basis and can materially assist in improving tax morality.   

When does Capital Gains Tax come into effect?
CGT came into effect on Monday 1 October 2001. Only Gains made after this date will be taxed, therefore it is important to know the value of an asset on this date.        

Who is liable to pay Capital Gains Tax?

• Resident Individuals, companies, close corporation and trusts will be subject to Capital Gains Tax on the disposal of any local or worldwide assets.
• Emigration is deemed to give rise to a disposal of assets.
• For resident individuals, certain private use assets are exempt from Capital Gains Tax (e.g. motor car, clothing, ect.)
• CGT also applies to non-residents in respect of local immovable property (or interest therein) or assets of a local permanent business establishment (e.g. a branch office).

What are affected capital assets? 
Affected capital assets are any kind of property, be it movable or immovable, tangible or intangible, for example land, mineral rights, office blocks, plant and machinery, motor vehicles, boats, caravans, trademarks, shares, ect. Affected capital assets exclude trading stock and mining assets that qualify for an income tax deduction as capital expenditure.   

What is the base cost of an capital asset?
The base cost of an asset it basically what you spend on attaining the asset as well as any other expenditure directly related to this or the disposal of the asset. It also includes any costs you encounter on improving the property.       

What if the property was a holiday home at the Coast and there was no rental income during the period of ownership? 
As no domestic or private expenses, or expenses not incurred in the production of income, are permissible as deductions against taxable income in terms of normal income tax rules, these current costs would not be deductible against revenue account. However, their identity would not change and they would not be allowed to switch over to capital account. Hence, they would not form part of base cost, even though they may not be utilised on revenue account.     

What is the inclusion rate?
Individuals only need to pay CGT on 25% of the net gain, while companies, close corporations and trusts need to pay on 50%.   

What assets are exempt from CGT? 

• Your primary residence (i.e the home that an individual/spouse or special trust owns and usually lives in) unless you make a gain or loss on it of more than R1 million.
• All private motor vehicles used for personal use, not business purposes.
• Personal belongings and effects, such as jewellery and collectibles, but excludes boats, caravans, aircraft, share certificates and gold or silver coins (such as Kruger Rands)
• Any proceeds from a life insurance or endowment policy (except for a second-hand policy)
• Any compensation you receive for personal injury, illness or defamation actions
• Prizes or winnings you receive from lotteries, betting or competitions, provided you are not a professional gambler.
• Foreign exchange gain or loss on currency you exchange back into Rands having used it for your personal use for a trip overseas.
• Small-business assets that you dispose of, where the proceeds will be used for your retirement, provided that you are over the age of 55 or you retire due to ill health
• Any institution fully exempt from normal taxations, such as government departments, local authorities and approved public benefit organisations.

When is Capital Gains Tax triggered?
CGT is triggered when a disposal has taken place – i.e. when there is a change of ownership when the asset is either:   

• Sold
• Given away
• Scrapped
• Exchanged
• Lost
• Destroyed
• Redeemed or cancelled

How are Capital Gains or Losses calculated?
A Capital Gain or Loss is the difference between the base cost and the consideration realised upon disposal of the assets. Where the capital asset was acquired before the effective date, time-based apportionment will be applied – i.e. CGT will only be paid on the gain or loss after the effective date. A taxpayer then offsets capital losses against capital gains. Capital Losses may only be deducted against capital gains and may not be offset against income from other sources. However, where the assets are depreciable assets, only capital gains fall within the CGT regime. Losses, scrapping allowances and recoupment still fall within the normal income tax regime.    A R1, 000 per annum primary exclusion will apply to a net capital gain/loss in respect of all capital assets disposed of by an individual during the course of a tax year, before any inclusion rate belief is given. Thus the first R1, 000 of a net gain or loss for a tax year will fall outside of the CGT  regime.        

If you purchased a second property 10 years prior to the effective date for R250 000, and sold it 5 years after the effective date for R850 000, you would have made a profit of R600 000,  but you will only pay CGT on the gain acquired after the effective date:  

• R600 000 x 5 years = R3 million
  BUT this R3 m was actually gained over a 15 year period, therefore
• R3 m / 15 years = R200 000 – the portion of the capital gain which can be attributable to the period after the effective date.
• As an individual you would also be allowed the primary exclusion of R1000, therefore you would only be subject to R199 000 x 25% = R49, 750 CGT

What records need to be kept? If you acquire an asset on or after the effective date, the following information must be kept:  

• Date of acquisition
• Details of any amounts forming part of base cost on disposal
• Date of disposal
• Details of any consideration received in exchange for the assets 
• Copies of contracts of purchase and sale
• Market valuations
• Invoices, receipts or bank stamped cheques for services rendered
• Advice notices relating to amounts paid by you to entities in which you have an interest
• Note: You must keep records relating to your ownership and all costs of such assets for 4 years from the date SARS acknowledges receipts of your income tax return reflecting the disposal. If, however, you are not required to submit a return and an asset was disposed of for more than R10 000, you should keep the records for 5 years after the date of disposal. If you have failed to keep records, there are a number of ways of acquiring them:    
• Your lawyer or estate agent will have kept copies of most of the records you need and will provide you with these
• If you have made improvements to immovable property, ask your builder for an invoice copy.
• If you have bought shares in a listed company, your stockbroker will be able to provide you with the information you need.

What is the administration procedure for CGT?
CGT forms part of normal income tax and as such, chargeable net Capital Gains or Losses are to be included in the normal income tax return and subjected to rates applicable to taxpayers. Where the taxpayer is a SITE only taxpayers, an abridged return will be available for completion and subsequent submission. As noted previously, Capital Gains or Losses are to be excluded from the computation of provisional tax, based on the irregular nature of such items. The general provisions of the Income Tax Act covering such aspects as returns, assessments, objections, appeals, payment and recovery of tax also apply to the CGT regime. ”       

This article has been reprinted with the kind permission of  KGT Inc.
011 – 285 3500

Zero Rated Property Transactions

” Either transfer duty or VAT is payable when immovable property is transferred from one owner to another.

If the Seller is not a VAT vendor then transfer duty will be payable.

VAT is payable when the Seller is a VAT vendor.

This means that the price must be calculated with the additional 14% VAT in mind.

There are, however, specific instances where VAT is calculated at a rate of 0% of the purchase price. These transactions are called Zero-rated transactions. Zero-rated transactions should be distinguished from transactions that are VAT exempt.

With Zero-rated transactions the transaction is subject to VAT, although the rate that is charged by SARS is at the rate of 0%.

For purposes of this newsletter, we have referred to VAT Practice Note No 14 as is available on the SARS website at www.sars.gov.co.za. There are certain issues that must be agreed upon, and must be in the agreement as per the SARS requirements in order to qualify for Zero-rating:

• The Seller must be a VAT vendor.
• The Purchaser must be a VAT vendor.
• The enterprise is being sold as a going concern.
• The enterprise must be a going concern. ‘  ”

This article has been reprinted with the kind permission of KGT Inc.
011 – 285 3500

Buying Property in South Africa

South Africa has one of the best Deeds Registries Systems in the world, which makes it very safe to purchase and sell property in this country.

The Estate Agent is involved extensively whilst choosing a property and concluding a Deed of Sale. Once you find a suitable property, the Agent will prepare an Offer to Purchase, which is open for acceptance by the Seller for a certain period of time. The Purchaser is not allowed to withdraw the offer in the stipulated period, and if the offer is accepted by the Seller, it becomes a binding Contract for the sale and purchase of the property.

One of the most important issues for the foreign buyer is the tax implications of purchasing a property in South Africa. The following will be payable on the sale and purchase of the property:

• Transfer duty payable prior to registration, which amount is calculated on the purchase price of the property;
• Property rates and taxes, payable monthly or yearly, which amount is also calculated on the purchase price of the property and a portion of which needs to be paid in advance before registration to obtain rates clearance;
• Capital Gains Tax, calculated on the capital gain or profit once the property is sold. As from 1 September 2007, the Purchaser is liable to pay withholding tax to the Receiver of Revenue on a percentage of the proceeds under certain circumstances.

The purchase of the property can be financed by obtaining a loan from a Financial Institution in South Africa, which loan will be secured by a First Mortgage Bond to be registered over the property when the property is transferred. Due to the Reserve Bank’s exchange control requirements, a foreigner can only obtain a loan for 50% of the value of the property, and not 100% like a South African citizen. If you require such a loan to be able to finance the property, a suspensive condition will be inserted in the contract making the sale of the property subject to the loan being granted. In the event that the application for the loan is unsuccessful, the contract shall expire and become null and void.

Once the contract is finalized, the Seller appoints a Conveyancing Attorney that will attend to the registration of the transfer of the property and the Mortgage Bond. The transfer process in short, involves the following steps:

• Once the suspensive condition is fulfilled and the bond registration instruction is received, the transfer documents and the Bond Documents are drawn for signature by the Seller and the Purchaser. Should you wish to leave the country during this time, it is a good idea to appoint an attorney by means of a Special Power of Attorney to sign the documents on your behalf in order to avoid the strict signature requirements in the event of the document having to be signed outside the country.
• The Bond Cancellation instruction, for the cancellation of the Seller’s Mortgage Bond registered over the property is also applied for at this stage. This instruction will contain the Title Deed of the property, which was held as security by the Financial Institution for the loan that was granted;
• Once the documents are signed and the transfer costs are paid, the Conveyance Attorney will pay the transfer duty and the property rates and taxes required in advance, in order to obtain the transfer duty receipt and the rates clearance;   
• Once the transfer duty receipt, rates clearance, and Bond Cancellation Instruction are received, the Conveyance can draft the new Title Deed in the Purchaser’s name, and the transfer, bond registration and bond cancellation can be lodged in the Deeds Office.
• The Deeds Office process takes 8 to 10 working days, where after the property is registered in the Purchaser’s name.

Steps 1 to 5 take approximately 2 months, but delays can be expected should documents need signature overseas.

As a South African citizen is only allowed to take R2, 000, 000.00 out of the country in a life time, the Conveyance attends to the endorsements of the Title Deed as ” Non Resident ” in the event of a cash transaction before it is delivered to the new Purchaser. This step is taken to expedite the transfer to the proceeds of the sale of the property off shore once the new Purchaser decides to sell the property.

This article has been reprinted with the kind permission of Dykes,Van Heerden.
Tel: (011) 279-5000
Fax: (011) 955-4799
E-mail: info@dykesvanheerden.co.za

Should you invest in property now?

Private Property* 08 June 2010

Should you invest in property now?

What to consider. Until the crash of 2008, South Africans have seen some of the highest growth rates in property prices in the world over the past decade. With real growth in prices being seen again, is now the time to try and make a killing in the property market? The first important lesson: don’t be misled by people who say they bought an investment property for R1m ten years ago, and just sold it for R10m. When evaluating the profits on a property investment, there are numerous costs to take into account, including transfer costs, interest paid on the bond, insurance, commissions, and maintenance and repairs over the years. And remember how much time it takes to buy, maintain and sell property! You will also need to be very patient.

 The market has changed significantly in the last two years, and making a quick buck by speculating in the market and flipping houses is no longer an option. You have to be committed for a longer period. If you need to rent out the property, you also need to be willing to manage tenants. Property investment offers numerous advantages. Typically, it is a less risky investment than shares, with inflation-beating returns over the long term practically guaranteed. Also, buying property offers an opportunity for the average Joe to use leverage to increase returns. For example, with a R50 000 deposit, you can buy and control a property of R500 000, unlike with a stock investment, where you need to pay the full price upon purchase. An investment property (a property you receive rental income for, not your personal home or flat) also offers tax breaks – eg, interest, taxes and insurance are tax-deductible against the rental income. Property offers a great way to diversify your investments – but do your homework about the area you are investing in, and make sure you are ready for the time commitment!

 *Article supplied by Private Property. Browse 1000s of real estate properties on South Africa’s busiest property website.

:: TRAFFIC FINES – WHOM TO CONTACT ::

:: TRAFFIC FINES – WHOM TO CONTACT ::. 

via :: TRAFFIC FINES – WHOM TO CONTACT ::.

Randburg Community Projects

The Chas Everitt Randburg Office has chosen to support Cheshire Home in terms of the Chas Cares programme that was initiated as a part of the Chas Everitt organization’s 30th Anniversary in 2010.

DEED OF KINDNESS – VISIT TO CHESHIRE HOME

12 May 2010 – Visit to Ann Harding Cheshire Home for the physically handicapped.

 1. Met with Manager Willem Roos
2. All residents presented with homemade gift consisting of toiletries, and magazines. Old clothes donated to their thrift shop.
3. All 40 residents (varying in age from 17 upwards) were visited. Residents include RSA, Malawi and Zimbabwe citizens.
4. Chas Everitt Randburg was received exceptionally well with such a spirit of optimism and thankfulness.

8 June 2010 – Barnyard event for Chas Everitt and Friends. 

Come and enjoy the night with us – and remember ITS FOR CHARITY.
Date: 8^th June 2010
Time: 7:30 for 8:00
Price: R120 per person

Join them at the Barnyard Cresta to support this worthy cause, contact the Randburg Office: 

Chas Everitt Randburg Office
Tel: 011 801 2500
Website: http://www.everitt-randburg.co.za

No credit danger yet, says Betterbond

  The local credit scene has been under the microscope of late, and concerns are being raised about the continued appetite for credit among South Africans. But to what extent is lending returning to the market?

Rudi Botha, CEO of Betterbond, says that as SA’s largest mortgage originator, the company is not seeing any reckless lending from the banks. “When it comes to home loans, the banks are still cautious about the loan-to-value and while availability of finance may certainly be increasing, responsible lending is still the order of the day.”

For example, he says, while some 78% of home loan applications were successful in the 2005 and 2006 boom times, only around 45% of home loan applications are currently successful.

“Banks are also taking the buyer profile into consideration when granting bonds. In the boom times approximately 25% of all buyers were investors. These days, owner-occupiers make up more than 90% of bond applications, a clear indicator that speculation has not returned to the market.”

And, Botha says, while South Africa is recovering from the financial crisis, it doesn’t mean that home loans are going to reach the approval rates they did before. “In fact, we are only hoping to reach a 60% approval rate within the next 12 months.”

The majority of homeowners now have to have equity in the form of a deposit if they want to buy a house,” he says, “as 100% home loans are very limited, and are mostly only available to first time homebuyers in the affordable market.

“This means that financial institutions take the ratio of debt to income quite seriously, and consider not only whether or not the buyer can afford the monthly bond repayments, but whether they can cover the immediate costs such as the deposit, transfer costs and legal fees as well.”

Botha believes that there is currently a healthy balance in the system, and that while the banks current lending policies may inhibit a growth explosion, they will encourage the sound and steady upward trend in the market.