Remember FATCA documents in cases of us citizens buying property in SA

22 July 2014

It must be noted by those selling homes, and their agents, that all Americans buying property in South Africa will now have to complete further documentation, in terms of an agreement between the South African Revenue Service and the US Internal Revenue Service (IRS), says Lanice Steward, managing director of Knight Frank Residential SA.  

The The Foreign Account Tax Compliance Act (FATCA) was passed into law in the US in March 2010 and this has been instated to fight tax evasion by US citizens using foreign financial institutions outside the US. This act governs the exchange of information between South Africa and the US, on a reciprocal basis, which means that from this year financial institutions, which include local banks, stockbrokers, hedge funds, pension funds, insurance companies and trusts, are required by the US government, under FATCA, to report information regarding the accounts of clients who are US persons to the US Internal Revenue Service via SARS.

In this documentation is a questionnaire which the applicant must disclose information such as their tax number, the country or countries that they hold citizenship in, the location of the majority of their assets and they must backing documents attached which include the following IRS forms:

  • W-9. This form is used when the client is affected by US tax laws and is a US tax payer.
  • W-8. This form is used when a client is affected by US tax laws but is not required to pay tax there. Although there are a number of different versions of this form, your client can be guided by the IRS website when he/she has to choose the appropriate form.
  • If a client confirms that he/she has relinquished US citizenship, you will need to obtain a W-8 and a 'certificate of loss of nationality of the United States' (a DS-4083).

“As of the 1st July, all agents have a responsibility to ensure that all the documentation has been completed and attached to the offer to purchase,” said Steward.