Buying a property as a person, company or trust

Buying a property as a person or a company/trust


There are various options available to purchasers of immovable property. Depending on the requirements of the purchaser they can choose to transfer the property to themselves in their personal capacity, or through a company, trust or close corporation.

These are some of the main factors to be considered when deciding which entity will be most suitable.

  • Transfer Duty
  • VAT – if a seller of a property is VAT registered, they pay VAT on the price of the property rather than a transfer duty. The buyer must however also be VAT registered
  • Protection from creditors
  • Administrative costs
  • Capital gains and other taxes

The individual pros and cons of each of the different capacities in which one can purchase a property are listed below.


Purchasing property as an individual


  • Transfer duty is paid on a sliding scale, which is always lower than the rate of 10% charged when purchasing through other entities.
  • When selling the property, the first R1 million of profit is exempt from captal gains tax, As long as the property is the individual’s primary residence, (applies to South African residents only). After the first million, Twenty five percent of whatever profit is remaining is added to the individual's income for the year, and taxed at the applicable rate of income tax. The maximum net CGT cost therefore, is 10% and this is the lowest possible rate of CGT.
  • In the instance of an individual’s death, Their entire estate, including immovable property is subject to estate duty. Up to a value of R1.5million is exempt from tax but the remaining value is taxed at 20%.
  • Properties in your name can be attached to you by creditors and can be taken to cover defaulted debt. For this reason, individuals trading under their own names may elect to register property in another entity.
  • There are no auditors or accounting officer's fees as their services are not needed

Purchasing Property as a Private Company


  • Transfer duty is at a rate of 10% of the purchase price. Transfer duty has to be paid even when buying shares in a company that owns immovable property.
  • Capital gains tax must be paid on 50% of all profit earned from the sale of property. This is the company's taxable income and taxed at a flat rate of tax of 29% which is effectively 14.5% of the capital gain.
  • When a company sells a property, the company must declare a dividend in order for the shareholder to acquire the profit realised on the sale. There is a further tax payable on this amount at a rate of 12.5%.
  • Companies can have a much larger number of shareholders than a close corporation. Company shares can be owned by trusts, close corporations and companies, where as a CC can only have a maximum of 10 natural persons as shareholders.
  • A company is a separate legal entity and therefore the assets of the shareholders may only be attached to cover the company’s debts if the individual had stood surety for the company.
  • When buying a property, the agreement of sale can be signed on behalf of a company that is not yet in existence. Thereby giving the purchaser more flexibility.
  • A company is prohibited from providing financial assistance to a purchaser of it’s own shares. Therefore equity in the company can not be used to assist in the purchase of more shares in the same company.
  • A company's financial statements are required to be audited.

Purchasing Property as a Close Corporation


  • Close Corporations are affected by, transfer duty, Capital gains tax and tax on dividends in the same way as private companies.
  • A close corporation, like a company is also a separate legal entity, so personal debts can not be attached to assets of the CC.
  • An accounting officer is required rather than an auditor, thereby reducing administration costs.
  • Property can be purchased on behalf of a CC that is not yet in existence.
  • Membership is limited to a maximum of 10 natural persons.

Purchasing Property as a Trust


  • Transfer duty is payable at a rate of 10% when a trust acquires immovable property.
  • Capital gains tax is highest for trusts that sell immovable property. 50% of the gained profits are added to the trust's taxable income and taxed at a rate of 40% which is a net capital gains tax of 20%.
  • Property held by a trust does not form part of an individuals estate on death, thus saving on estate duties.
  • Trusts are not required to be audited.
  • Trusts are separate legal entities, so the trust’s assets cannot be attached by creditors of the beneficiaries.
  • An Individual cannot act as a trustee for a trust that does not yet exist. Therefore trusts must be in existence at the date of signature of the agreement of sale.

There are pro’s and con’s to buying immovable property in each of these entities. And your best option will depend on your personal circumstances. For advice on which entity to choose when buying a property it is beneficial to consult an attorney before making any concrete decisions.