Buying property as a private individual, as a company or through a trust Though many might not be aware of it, there are three different forms of homeownership in South Africa. These include owning a home as a natural person, a company, or as a trust. Each option has its own set of pros and cons, which is why it is important to understand each option before going ahead with the purchase.
Buying as a natural person The most popular common option is to buy a home as a ‘natural person’. This means that the home will be registered in your name as an individual, without representing any other legal entity. When purchasing a property as a natural person, transfer duty will be paid according to a sliding scale depending on the purchase price of the home.
One benefit of purchasing as an individual is that paying Capital Gains Tax (CGT) will be exempt of the first R2 million of any profit made on the sale of the property provided the property is the owner's primary residence. The definition of a primary residence is: a property which is owned by a natural person, the owner or their spouse ordinarily resides within the property as their main residence, and it is predominantly used for domestic purposes. If the primary residence is sold for R2 million or less, the full capital gain will be disregarded.
The downside of this form of ownership only arises if you run your own business. As a business owner, if you run into financial trouble, you risk losing your home. Any properties you own will become prime targets to creditors who want to mitigate their loses.