All people, both South Africans and foreigners have to file income tax returns in South Africa if they earn rental income from South African properties that earn rental income. It does not matter that a person is for example living in Germany and declaring the income in his/hers German tax return.

If the property is in South Africa then the source of the income is from a South African source. If the person lives abroad and is a tax resident of that country and if that country has a Double tax agreement with South Africa then any SA tax that is due to a rental profit is deductible in the foreign country.

Landlords often do not understand fully the difference between a repair and an improvement. Repairs are tax deductible from rental income and improvement costs are deductible against the capital gain on selling the property.

The same expense can in certain circumstances be deemed as a repair and tax deductible in other as of a capital nature (and only deductible on selling). If a wall need paint and I hire a painter and he paints it while I have a tenant then it is deemed to be a repair and tax deductible. If a tenant gives notice that he is moving out on 30 June and I think the property needs a bit if paint and I decide to do it in July and also some other repairs before a new tenant move in on 1 August then all these repairs are deemed to be of a capital nature. SARS is also of the view that all levies, insurance, interest on bond, etc. in July should be deemed as “capital in nature”. It is therefore not tax deductible. A solution might be to do it while one still has a contract with the tenant and maybe to lower the rental a bit for the inconvenience.

Keep proper record of all improvement costs as that will decrease your capital gain one day on selling.

If you need assistance with tax registration or filing of South African tax returns or need tax advice you are welcome to contact the Tax Consultant Fanus Jonck (tax@jonck.net)