Buying property through a company in South Africa

Article summary

• Buying a property as a company provides protection from personal insolvency.
• Selling the property as a company exempts you from transfer duty, but subjects you to Capital Gains Tax.
• You can use our Transfer Cost calculator to determine what bond registration and transfer costs would be required of a company as opposed to a natural person.

There are a number of ways to buy a property in South Africa, and one of them is through a legal entity. Of course, you should take into account your reasons for buying the property before determining whether to purchase it as a natural person or as a company, as there are some differences between the two approaches.

Why would you buy a property through a company in South Africa?

Properties purchased through companies are usually for the purpose of buy-to-let. It doesn’t make much sense to purchase a property through a company if you plan to live in it.

It’s important to have a business plan for the property that takes into account the costs of running the company. There may be tax benefits to buying as a company, such as saving on transfer duty, but this could be outweighed by the increased costs of running the business if there is no property investment strategy.

The process of buying through a company

If you’re buying through a company, you can’t make all the decisions yourself, like you would as a natural person. Decisions need to be agreed on by the board of directors or stakeholders. An individual is then authorised by this board to sign the offer to purchase, as well as the various documents related to the purchase.

Advantages of buying through a company:

• Protection against personal insolvency. The property will not be affected if one of the individuals involved in the company, such as a director, goes insolvent.
• If the company decides to sell the property, no transfer duty will be payable if the seller is registered for VAT.
• The sale will not incur estate duty either, as a company is not a person and cannot pass away.

Disadvantages:

• A company selling a property will have to pay substantial Capital Gains Tax, significantly more than if it was being sold by an individual.

Our website includes a Transfer Cost Calculator that you can use to calculate bond registration and transfer costs. The calculator allows you to determine what difference in cost would be between a natural person and a company.

Applying for a home loan

ooba Home Loans is South Africa’s largest home loan comparison service, and we can assist you in acquiring a home loan. We can submit the application to multiple banks, allowing you to compare quotes and choose the deal with the most favourable interest rates.

In addition, we offer a range of tools that make the property purchase process easier. Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.