FAQ – Expat wanting to buy property

 A Fin24 user living abroad is not sure about the tax implications of buying property in SA. He writes:

I am confused as to the correct tax law applicable to my situation. Please help.

I have been working abroad in Dubai, employed in a full time position by an international company, since September 2012.

My salary is paid into my Dubai account, after which I have been transferring the majority of it back to my South African bank account each month.

I am fully aware of the tax clause “rendering services, for more than 183 full days, of which more than 60 full days are continuous, during any period of twelve months and those services were rendered during this period”.

I qualify under this clause, as I only spend 30 continuous leave days in South Africa each year for my annual vacation.

However, I heard about the following, and would like to get confirmation on how it works:

I currently own no property in South Africa, but I am planning to buy a property cash in South Africa within the next two years, while continuing to work overseas.

Is it true that, if I buy a property in South AFrica, I will be taxed if I am not working abroad as an expat for more than five years?

What happens if I return to South Africa after four years of working abroad? Will I be taxed because I have not been out of the country for more than five years?

And if I own property, will there be other tax implications on my overseas earnings?

Would I be able to qualify for a bond in South Africa with my overseas salary if I wish to buy a property in South Africa sooner? Any tax implications for this?

Marc Sevitz of TaxTim responds:

Your income whilst working overseas will not be taxed as, based on the information provided, you currently fall within the exemptions stipulated in s10(1)(o)(ii) if the Income Tax Act.

However, if you purchase a property in SA and earn rental income, this will be taxable in South Africa due to the source of the income being South African.

As for qualifying for a bond, the banks will determine this based on a financial analysis of your situation.  

– Fin24