A transfer of immovable property was registered at the Deeds Office on the 19th November 2020. The transfer was subject to Section 35(A) of the Income Tax Act. The seller’s accounting officer applied for a tax directive on or about the 3rd December 2020 and the conveyancers still hold 7.5% of the purchase price in their trust account. Please advise on the following: 1. Whether the application by the seller’s accounting officer interrupts the period within which the conveyancers should make payment of such withholding tax to SARS? 2. When must the conveyances make payment of such withholding tax to SARS?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
Section 35A(2) of the Income Tax Act deals with the directive and reads as follows: The seller may apply to the Commissioner, in the form and at the place as the Commissioner may determine, for a directive that no amount or a reduced amount be withheld by the purchaser in terms of subsection (1) solely having regard to – (a) any security furnished for the payment of any tax due on the disposal of the immovable property by the seller; (b) the extent of the assets of the seller in the Republic; (c) whether that seller is subject to tax in respect of the disposal of the immovable property; and (d) whether the actual liability of that seller for tax in respect of the disposal of the immovable property is less than the amount contemplated in subsection (1). Section 35A(1) of the Income Tax Act requires the person making payment, the estate agent or conveyancer in this instance, to withhold the tax before payment is made. In terms of section 35A(4), the amount withheld by a purchaser in terms of subsection (1), must be paid to the Commissioner – (a) where that purchaser is a resident, within 14 days after the date on which that amount was so withheld; or (b) where that purchaser is not a resident, within 28 days after the date on which that amount was so withheld. In short, the legislation doesn’t deal with when the directive must be applied, or that payment to SARS it is deferred if a directive was applied for. In this instance it appears that the 92.5% was already paid and we suspect that if the directive is not received before the end of the period mentioned above, that the payment will have to be made to SARS.