Buying a house for someone else.

[HavocXphere]

Recipient would still be liable for some kind of tax

There is tax consequence if its not deemed at market value. Can’t remember the proviso. But it’s similar safeguard to the one where you sell your house at a significantly low price to avoid transfer duties and taxes.

Nope. No tax whatsoever on this one.

Now you guys just need a foreign sugar momma

 

[HavocXphere]

Everyone screams donation, but what if it's just a "loan"? Can be governed by a loan agreement, however "serious" the loan may be..

Last time I check you had to be a registered credit provider to lend me more R500k though, not sure what it is now.

If you like paying taxes sure.

 

[ElixirCoder]

Does anyone know if there are implications of buying a house and putting it in someone else's name? (tax, etc).

i.e. Person A buys a house for 2.5m and registers it in Person Bs name. Person B has just gained an asset of 2.5m without paying anything.

In this case the 20% donations tax is applicable and payable for the amount over R100000. Unless the parents are non Tex resident, as others have pointed out.

 

[Speedster]

In this case the 20% donations tax is applicable and payable for the amount over R100000. Unless the parents are non Tex resident, as others have pointed out.

A cool R480k tax (in addition to the R91k transfer duty)

 

[ElixirCoder]

Everyone screams donation, but what if it's just a "loan"? Can be governed by a loan agreement, however "serious" the loan may be..

Last time I check you had to be a registered credit provider to lend me more R500k though, not sure what it is now.

That’s not true, you can loan any amount you want and you may charge interest as well. Obviously it cannot be loaned from a business you control, in which case you’d need an applicable license for the business.

If at any point you forgive the debt, then the donations tax will apply.

note this differs from inheritance and estate duties are a different beast.

 

[SAguy]

Donations tax is an absolute load of bs. I know it's supposed to prevent a lot of criminal intent and tax evasion, but really...

We bought a car for our inlaws a few years back, had to keep it on our name in order to prevent having to pay donations tax.

You can't even buy your 21 year old kid a car without paying donations tax on top of it.

Or you want to give your kid some money towards buying their first house... Mr Taxman will be knocking on your door, to tax you on money you already paid income tax on.

 

[xrapidx]

That's a very good question.

I'm about to pay off my wifes FJ Cruiser, and will register it in her name - will donation tax be applicable to something like that? (only reason to register it in her name is she wants a car in her name)

 

[F1 Fan]

In this case - the house is to be rented out to someone else, the income from the rent will go to the parents until they're out of the picture.

How should a loan be structured? Surely it has to be some sort of contract?

I have advised them to speak to a professional - but the case itself interests me - because I can't stand the tax man.

In simple terms, you would incurr 20% donations tax.

In this scenario, you could draft a loan contract stating the money has been loaned to person B to buy the property. Upon death of person A, the estate of person A will pay donations tax on the outstanding loan balance as it will now be written off.

Let the rental go to person B, let it be taxed, and let the balance flow to person A as a repayment on the loan. In addition, person A can donate an additional 100k per annum, tax free to reduce the loan. If you lucky, the property can be "repaid" in 10 years.

Not an expert, but that's my understanding.

 

[F1 Fan]

That's a very good question.

I'm about to pay off my wifes FJ Cruiser, and will register it in her name - will donation tax be applicable to something like that? (only reason to register it in her name is she wants a car in her name)

Na, vehicles not really an issue unless you are seriously under SARS scrutiny. Like the above, you could always mark it as a loan and claim the loan will be paid in cash.

If you or your wife gets audited, you just need to prove you earn enough to be able pay it back in cash. But highly unlikely.

 

[SAguy]

That's a very good question.

I'm about to pay off my wifes FJ Cruiser, and will register it in her name - will donation tax be applicable to something like that? (only reason to register it in her name is she wants a car in her name)

Donations tax doesn't apply for funds transferred between spouses (not sure if there's any difference on married in/out of community of property though)

 

[SAguy]

Also remember that donations tax applies to the donor, so if you give 1 person R100k then that's your limit for the year.

If you then give someone else a R10 chocolate as a gift because their goldfish died, then you owe SARS R2 tax.

Edit: And if SARS finds out and you aren't able to pay the R2 tax, then SARS can go after the poor person who just lost their goldfish for the R2.

 

[ElixirCoder]

That's a very good question.

I'm about to pay off my wifes FJ Cruiser, and will register it in her name - will donation tax be applicable to something like that? (only reason to register it in her name is she wants a car in her name)

No, this is not applicable between spouses.

 

[SAguy]

No, this is not applicable between spouses.

So if you want to buy someone a house, get a quick court marriage, buy the house and get divorced a few months later.

It's cheaper than paying R480k donations tax on a R2.5m house.

 

[ElixirCoder]

Also remember that donations tax applies to the donor, so if you give 1 person R100k then that's your limit for the year.

If you then give someone else a R10 chocolate as a gift because their goldfish died, then you owe SARS R2 tax.

I get your point and I despise these (and most other) taxes. However, you'd need to donate a R100010.00 chocolate to owe the R2 donations tax

 

[SAguy]

I get your point and I despise these (and most other) taxes. However, you'd need to donate a R100010.00 chocolate to owe the R2 donations tax

How so? If you've given one person R100k, then any cent you give anyone else is subject to 20% tax.
Maybe I'm misunderstanding you?

 

[Sinbad]

Na, vehicles not really an issue unless you are seriously under SARS scrutiny. Like the above, you could always mark it as a loan and claim the loan will be paid in cash.

If you or your wife gets audited, you just need to prove you earn enough to be able pay it back in cash. But highly unlikely.

There is no donations tax between spouses.

Just gave my wife a Porsche....

 

[SAguy]

There is no donations tax between spouses.

Just gave my wife a Porsche....

myBB tax - 20% of whatever she's giving/doing to you to make you want to buy her a porsche

 

[ElixirCoder]

How so? If you've given one person R100k, then any cent you give anyone else is subject to 20% tax.
Maybe I'm misunderstanding you?

Lol, I didn't read your whole message, you are correct.

 

[Sinbad]

myBB tax - 20% of whatever she's giving/doing to you to make you want to buy her a porsche

Putting up with me, mainly

 

[ElixirCoder]

In simple terms, you would incurr 20% donations tax.

In this scenario, you could draft a loan contract stating the money has been loaned to person B to buy the property. Upon death of person A, the estate of person A will pay donations tax on the outstanding loan balance as it will now be written off.

Let the rental go to person B, let it be taxed, and let the balance flow to person A as a repayment on the loan. In addition, person A can donate an additional 100k per annum, tax free to reduce the loan. If you lucky, the property can be "repaid" in 10 years.

Not an expert, but that's my understanding.

In the event that the transfer occurs as part of a bequeathment or due to inheritance, different rules apply (estate duties)