19 October 2009

Tax Concession - Trust, Co or CC

There was a time when there were advantages to owning property through a company or a close corporation. Instead of selling the property, one could sell the shares/members interest and loan accounts of the company or close corporation which would mean that the purchaser did not pay transfer duty. This resulted in the purchaser saving large amounts of money and accordingly one could either ask for a higher selling price or sell the “property” easier. However in 2002 legislation was passed in terms of which a company, close corporation or trust which owns residential immoveable property is treated as if it is immoveable property. This designation means that the sale of the trust or the shares or members interest and loan account in such company or close corporation is subject to payment of transfer duty calculated on the value of the immoveable property.

With the introduction of capital gains tax (CGT) in 2001 companies and close corporations were placed at a disadvantage in relation to individuals in that they could not claim the primary rebate (at present R1 500 000.00) provided to individuals on their primary residence. Further the effective rate for capital gains tax payable by a company or close corporation is higher than the rate payable by individuals.A further disadvantage is that when a company or close corporation disposes of its property and proceeds to distribute the profit to its shareholders or members, the company or close corporation pays secondary tax (STC) or dividends tax. Furthermore in terms of the Companies Act of 1973 an annual fee is paid by companies.

In light of the above the owning of residential property through a company or close corporation no longer makes sense. As a result of this more individuals wish to transfer their properties out of their companies into their own name. At present if a company or close corporation were to transfer a property to an individual it would be liable for CGT and STC or Dividends Tax and the individual purchasing the property would pay transfer duty. Now with the passing of the Taxation Laws Amendment Bill of 2009 individuals will from the 1st January 2010 for a period of two years be able to acquire property from their company, close corporation or trust without such entity paying STC or Dividends Tax or CGT. In addition, no transfer duty will be payable. Effectively the liability for the capital gains will roll over to the purchaser i.e. the base cost for the property will be what the base cost would have been for the seller. This will only be applicable when the purchaser sells the property and the purchaser will have the benefit of the primary residence exclusion.

How to qualify
To qualify the Bill requires the following:
1. The property must be the sole asset of the company or close corporation or trust;
2. The property must be a residence used exclusively for domestic purposes. Effectively the property must be your primary residence. Residence includes “any structure including a boat, caravan or mobile home which is used as a place of residence by a natural person, together with any appurtenance belonging thereto and enjoyed therewith”.
3. An interest in a residence must be transferred from a company, close corporation or trust to a natural person.
4. Shares or member’s interest must have been held directly by a natural person alone or together with his/her spouse or by a trust.
5. Period – The company, close corporation or trust must have owned the property on or before 11 February 2009 and must distribute the property between 1 January 2010 and 31 December 2011.

Application of the Bill does not apply
The Bill will not apply where:
1. The company has more than one shareholder or the close corporation has more than one member;
2. The company or close corporation owns more than one property;
3. Where the shareholder of a company is not a natural person or trust but a legal entity

Trusts as shareholders of company
Originally the Bill did not cater for residences owned by companies which in turn were owned by a trust. However the concession now also extends to trusts. Consequently the Act provides that a company which owns a residence and whose shares are held by a trust may distribute the property to the individuals who are the beneficiaries of the trust without adverse tax consequences.AdvantagesAt present a company or close corporation pays STC and CGT without any primary rebate and the purchaser pays transfer duty.

Now if the property qualifies for the concession the seller will have the benefit of not paying the following:

CGT – The seller will not pay CGT on the transfer of the property to the individual natural person. However the individual is not exempt from CGT. The CGT that would have been paid by company is effectively transferred and rolled over to the individual who takes the transfer of the property. Thus the individual will ultimately become liable to pay CGT on the sale of the property. However if the individual maintains the property as his/her primary residence he/she will now have the benefit of the primary rebate of R1 500 000.00 provided for CGT.

STC – On the sale of the property the company or close corporation would distribute the profits to its shareholders. Such award would constitute dividend for STC purposes. Under the amendment the individual will not be liable for STC.

Transfer Duty – Prior to the passing of the Bill the purchaser would be liable for transfer duty on the sale of the property. If the transfer of the property is done within the period there will be no transfer duty payable on the transaction.DisadvantagesAlthough the concession is very generous there is a disadvantage in respect of properties that are owned by trusts. Once the property is transferred into the beneficiaries own names their personal estate is increased which results in an increase of their estate for estate duty purposes thus undermining the objective of creating a trust.

Cost involved
The purchaser will still incur other ordinary costs of transfer such as conveyancing fees. Since there would be no purchase price the calculation of fees would likely to be based on the municipal value of the property. If the property was mortgaged to secure a loan the shareholder or member would need to discharge the loan and pay for the bond cancellation. The purchaser could apply for a new loan to be secured by the registering of a mortgage bond against the Title Deeds of the property. The cost of registering such bond would also be borne by the shareholder or member.

Information supplied by Dykes van Heerden, Attorneys
E-mail: info@dykedsvanheerden.co.za
Web: http://www.dykesvanheerden.co.za/

01 September 2009

www.GooseValleyProperty.co.za launched

Chas Everitt Plettenberg Bay has launched a new Goose Valley website http://www.goosevalleyproperty.co.za/. John Fuller says that this site focuses primarily on marketing Goose Valley Property and compliments Chas Everitt's other dedicated Goose Valley websites such as http://www.goosevalleygolf.com/ (accommodation), http://www.goosevalleygolfestate.co.za/ (property & accommodation) and http://www.turtlecreekgolfestate.co.za/.

The new website provides comprehensive access to property legal and tax advice and information on Plettenberg Bay, the Goose Valley developments and the Golf Club.

Fly 'n Buy Package introduced by Chas Everitt Plettenberg Bay

Chas Everitt International Property Plettenberg Bay has introduced a unique Fly 'n Buy package for serious buyers wishing to purchase Plettenberg Bay property. This unique offer results in Chas Everitt reimbursing buyers for airfares, accommodation and car rental. The package conditions are available on Chas Everitt's websites such as http://www.everitt-plett.co.za/ and http://www.goosevalleygolf.com/. Simply click on the Fly 'n Buy logo and the PDF document will open providing full details of the qualifying procedure and applicable conditions.

John Fuller, Principal of Chas Everitt Plettenberg Bay says that although only just launched several buyers have already decided to make use of the offer. John says that even in tough market conditions estate agents need to be innovative to ensure that they proactively grow market share, and this offer ensures that our sellers improve their chances of selling their homes as quickly as possible.

08 August 2009

Huge Tax Break On Properties

Monique Vanek
27 July 2009

What you should know to transfer your property out of a company and get a 22% tax saving.

Seldom does the South African Revenue Service (Sars) open a tax-free window period, and rarely does it do it twice. So when it announced in a June draft amendment that individuals who own their primary residence in either a company, or a closed corporation (CC) can transfer their property tax free into their own name for the second time it came as a surprise and should be taken advantage of.

The draft amendment is likely to be finalised in the next few weeks, here's the lowdown.
All individuals who own their primary residence in either a company or CC can transfer their property into their own name without having to pay capital gains tax (CGT), transfer duty and secondary tax on companies (STC) from January 1 2010 until December 31 2012. This is a huge tax saving of just under 22%.

They can only do this if their domestic residence is exclusively used for domestic purposes, says Mike Teuchert, a tax partner at Grant Thornton. However, "no clarification has been given to the meaning of the term domestic purposes, although it would exclude the situation where a person also uses their residence for the purposes of running a part-time small business", says Teuchert.

Unfortunately the exemption does not apply to those who own their primary residence in a trust, as was the case in the previous window period, however this could change in the final draft, notes Deborah Tickle, a member of Saica's National Tax Committee.

Also if the property is not in your own name you can not take advantage of the exemption.
For those who transferred their properties out of a CC, or company after the 2001 window period and before this new one starts you will not be reimbursed, says Tickle.
Of course this exercise is not without costs, says Teuchert. You will still be responsible for costs associated with the transfer of you property, such as conveyancing fees and bond cancellation costs, reckons Teuchert.

So how do you go about transferring your property out of your CC or company? Firstly, you'll have to visit a conveyancing attorney to transfer your property, cancel your bond and register it in your own name. Secondly, you will need to make sure your books are in order and close them off. Thirdly, you will have to fill in a tax return and supply Sars with your latest set of accounts. Finally you will need to deregister your company with the Register of Companies, says Tickle.
Ntombikayise Baepi a senior associate at ENS reckons Sars has provided this second window period to cleanse the Register of Companies of inactive and dormant companies. Tickle says it has also done so to help individuals avoid the high costs of being a registered company when the Companies Act comes into full force next year.

01 August 2009

Boost For Goose Valley Rentals

Katrina Olwagen, Rentals Manager for Chas Everitt International Property's on-site Goose Valley Office reports substantial interest for holiday rentals from the end of this year and through to March 2010. She has almost run out of stock and urgently needs more 2 bedroom 2 bathroom and 3 bedroom 2 bathroom Units to let. The Chas Everitt office at Goose Valley handles holiday and long-term letting, property management and sales of apartments. There is also an Internet facility available for residents and copy and fax facilities.

Katrina says that she receives more Goose Valley, Turtle Creek & Fairway Close rental enquiries because of the extensive advertising done by Chas Everitt, including having the only dedicated Goose Valley accommodation website http://www.goosevalleygolf.com/, as well as from the listings of all of her clients' properties on Chas Everitt's websites, such as http://www.everitt-plett.co.za/, http://www.chaseveritt.co.za/, http://www.chaseveritt.com/, http://www.chaseveritt.co.uk/, and up to one hundred other sites including http://www.cyberprop.co.za/

Chas Everitt Plettenberg Bay is a licenced real estate company, and is part of one of South Africa's largest real estate groups, is registered with the Estate Agency Affairs Board and is a member of the Institute of Estate Agents, the Plettenberg Bay Business Chamber and the Plett Tourism Association.

When clients deal with a registered agent they can rest assured knowing that all money received by the letting company is deposited into a trust account. The Trust Account must be audited within four months after the financial year end and the auditors must submit a report to the Estate Agency Affairs Board. Should the letting agent commit fraud the EAAB will compensate the client from its Fidelity Fund. It is a criminal offence for letting businesses and their staff to operate without being registered with the EAAB and letting agents must be qualified Estate Agents. It is also against the law for anyone other than an Estate Agent to let a property for gain unless it is their own. When you deal with a letting company ask to see their valid Fidelity Fund Certificate (FFC). If they don't have one - BE VERY CAREFUL, they may be spending your funds on a daily basis and could be closed down before you receive your money.

The best way to sell your property

Isn't it interesting how in these times we read that the best way to sell a property is by public tender or auction? The truth is that in a Buyers' Market it is only bargain hunters who attend auctions or submit tenders. Quite simply, they are the investors with cash and are looking for bargains. Auctions and tenders will only realise decent prices if the seller has a unique one of a kind property, such as the last piece of prime beachfront land.

I'll let you into a secret. The ONLY factor that sells property is PRICE! Price is relative to position, location, condition, age and other similar factors. If your property has not sold in the current market IT IS OVERPRICED. A few years ago there may have been 50 buyers in any month looking for property like yours. Today there are 20 buyers and they are comparing prices of all similar properties. If your property is overpriced it is compared to lower priced properties and those are the ones that are selling.

So, if you need to sell now, listen to a reputable Estate Agent and price your property competitively to sell in the current market. Estate Agents are not motivated to sell overpriced properties, but overpriced properties do fortuitously help them sell the better priced ones!

So what is the best solution? Deal with a reputable Estate Agent with a proven record of sales in your area, grant them a Sole Mandate and ensure that you receive a written marketing plan for your property. Make sure the mandate can be cancelled should the Agent not implement the marketing plan! Your Agent will then work hard on marketing the property, and spend money doing so, and is unlikely to accept a Sole Mandate appointment if the price is not market related.

17 July 2009

New Listing

Sole mandate:

Fabulous sea facing 2 bed 2 bath Unit. Fully furnished and equipped. Ground floor entrance. Large balcony. Underfloor heating. many extra cupboards. Unsurpassed 180 degree views of the Golf Course, Estuary and Bay. A great buy at R1 400 000.

Contact johnf@everitt.co.za or call +27 (0)82 905 1516

New Electrical Regulations

The Government has promulgated the new Electrical Regulations 2009 which repeals the old 1992 regulations. The old Certificate of Compliance (COC) has been replaced with the Electrical Certificate of Compliance (ECC). The new regulations affect owners in the following way:

  • Whereas the old COC was valid indefinitely as long as the owner had not made any electrical alterations to the premises, the new regulation provides that the new ECC will only be valid for a period of two years. Sellers will therefore have to provide Buyers with a new ECC where the certificate is older than two years.
  • Transfer cannot be effected without a valid ECC.
  • The new regulations became effective from 1 May 2009

26 June 2009

Snow in Plett

The drought has finally been broken with some very strong winds and driving rain over the past week. A fair amount of damage was done with trees uprooted and signs destroyed, but fortunately nothing too serious. Big seas have been running and waves have again come over the Bird Island sand spit separating the Keurbooms Estuary from the Bay. But the best news of all is that the Tsitsikammas and Outeniquas are covered in snow! The falls have far exceeded that of the previous three years and we are all waiting for the clouds to lift so that some spectacular pictures can be taken. There is simply nothing more beautiful than our beautiful Bay being surrounded by a ring of snow!

09 June 2009

New Listing!

Goose Valley Property - Just Listed!
Excellent value! R1 250 000.
3 Bedroom, 2 bathroom ground floor Unit on the 10th green.
Fully furnished and complete with quality appliances.
The best priced 3 bedroom Unit at Goose Valley
Contact johnf@everitt.co.za or call on +27 (0)82 905 1516

What are Goose Valley tennants looking for?

Chas Everitt's Goose Valley rental office reports that tenants consider the following accommodation requirements to be most important.
  • 75 - 80% of tenants choose quality above price
  • They insist on comfortable couches and beds
  • Quality linen with no floral designs
  • DSTV
  • Well equipped kitchen, preferably with dishwasher
  • Sea views
  • European visitors prefer 2 bedroom, 2 bathroom upstairs units
  • South Africans prefer 3 bedroom units on ground floor (family bookings with children)

In general people return to Goose Valley because of the beauty, relaxed family environment, golfing experience and central location in the Garden Route.

News June 2009

This is the quiet period of the year, before the July school holidays. As usual the golf course is in stunning condition and the Gardens team are replanting many gardens. Thousands of new plants have been planted to ensure that when summer returns the Estate will be spectacular.

The Chas Everitt on-site Goose Valley Rentals and Sales Office reports that winter bookings are down on last year and the golf course also appears much quieter than normal. Chas Everitt advertises its contracted rental owners' properties on many websites, including http://www.chaseveritt.com/, http://www.chaseverittgardenroute.co.za/, http://www.everitt-plett.co.za/, http://www.chaseveritt.co.za/, http://www.chaseveritt.co.uk/, http://www.goosevalleygolf.com/, http://www.goosevalleygolfestate.co.za/, http://www.turtlecreekgolfestate.co.za/, and many other websites, - too numerous to mention. The rental portfolio has also been advertised in the Weg and Go Magazines and a Winter Special Golf & Accommodation promotion has again been put together with the Goose Valley Golf Club.

December enquiries are picking up and Chas Everitt reports that bookings from tourists between February 2010 and April 2010 have thus far been exceptional. They also report a good response for long-term rentals. The Rentals Manager, Katrina Olwagen, can be contacted on e-mail at plett.rentals@everitt.co.za or via telephone @+27 (0)44 533 6000 or Fax +27 (0)44 533 3429.

Plett's weather has been exceptional for the past few months, but everyone is hoping for good rain soon. Water restrictions are still in place, preventing the watering of gardens, but the water situation appears to have been better managed than in other nearby Garden Route towns. Goose Valley remains in the very fortunate position that the Estate is 100% irrigated with recycled water.