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Basic costs involved in selling a property in your personal name
Selling your property is a daunting process, especially when you don't know all the facts. It is so easy to lose sight of the escalating costs involved when the emotions of parting with your much loved home, or hard earned commercial property, get in the way of sound financial reasoning... (...and occasionally the unscrupulous real estate agent who wants to take advantage of your naivety!!!!)
Here is a list of the costs to expect when disposing of property in Zimbabwe, with an example to make the explanation more accessible to the laymen out there. (You don't need to be experts in real estate when there are already experts out there to guide you!!!)
1. Market Appraisals: I suggest you get the market value of your property from at least 2, but better 3 Estate Agents so that you have a fair idea of what your property is worth. (...NOT WHAT YOU WOULD LIKE IT TO BE WORTH!!!!) These market appraisals vary from free of charge to up to $150 each. Normally, the market appraisal is done for free if the property is listed with the agent.
2. Commission: The going rate is 5% plus 15%VAT. This is above the recommended minimum scale of fees laid down by the Real Estate Institute of Zimbabwe. The minimum commission a registered Estate Agent is permitted (by law) to charge is 3% plus 15% VAT.
3. Capital Gains Tax on Individually Owned Properties: In Zimbabwe, this is really quite complicated, so try and bear with me...
If you purchased your property before February 2009 (when we dollarised) then there is a flat rate of 5% of the sale price as capital gains tax. There are certain situations where one is exempt or can apply for a rollover...but this is a whole new topic.
If you purchased the property after Feb 2009, then there is a rate of 20% on the gain of the capital from time of purchase to time of sale. Deductions can be made for improvements and costs like transfer fees and commissions paid.
4. Private Sales: These may seem cheaper as you save yourself the commission, but you will still need to do some form of advertising and if eventually you do need the help of a registered Estate Agent, they will charge you 3% plus VAT of 15% to do the agreement and everything else. My advice is always to seek professional help either through a lawyer, accountant or reputable Estate Agent as this will save you money in the long run.
Let's look at a working example of an average house sold for $200 000 purchased before February 2009
|Sale Price||$200 000|
|Commission 5%||$ 10 000|
|VAT 15% on Commission||$ 1 500|
|5% CGT||$ 9 425|
|FINAL BAL||$179 075|
Now if you bought the house in June 2009 for $140 000 and sold it for $200 000
Balance after Commission is still $188 500
Less Purchase Price $140 000
Balance $48 500
20% CGT on this $9 700
FINAL BAL $188 500- $9 700= $178 800
So the two methods come to the nearly same amount. Remember in the second example you will be able to deduct original transfer fees, and improvements made to the property, which will help bring done your tax bill.
Cost of selling your property held in a company or trust
If you read my previous blog about selling your property held in a personal name, then you would realize that there are 2 main areas of cost: The Estate Agent's fees (market appraisals and commission) and the Capital Gains Tax.
With the sale of a property held by a company or trust the Estate Agent's Fees still apply, but the Capital Gains Tax varies and there are accountants' fees and lawyers' fees involved.
Capital Gains Tax is payable on the sale of any shares in a company and the rate is 20%. Some creative accountants may find ways to lower this cost, but it is always best to budget on the most expensive outcome, and be pleasantly surprised in the end if the whole process costs you less. So many sellers have the misconception that there is no Capital Gains Tax due when a property held by a company is sold. They often have been incorrectly advised when they purchased the property and thought that the best, and cheapest way to sell their house in the future would be in a company. Please don't make this mistake!
Properties held by trusts do not incur Capital Gains Tax as in effect no sale has taken place. When you sell your property to the new buyers, you cede your rights to the trust and the Trustees and Beneficiaries change, but the owner of the property remains the same, i.e. The Trust still owns the property. As this transaction does not need to be approved by ZIMRA, the Deeds Office or the Registrar of Companies, it is exempt from Capital Gains Tax. Please note that this is the case at the time of writing, and anything can change in Zimbabwe at any time!!!
Finally, you will have to pay accountants' fees for the change of directors in the company and with a trust you will pay lawyers' fees for the cession documents. These charges vary depending on the lawyer and accountant. It is fairly acceptable to ask the buyer to meet these costs, as with these two types of sale the buyer does not pay transfer fees. However, there are some instances when the fees are split between the buyer and the seller. This is negotiated at the time of acceptance of an offer.
If you have any specific questions regarding the sale of your property, please leave a comment below and I will try and answer it.
Have a great day...
What's it going to cost me to buy a property in Zimbabwe?
So you've decided that Zimbabwe is the place you wanted to put your hard earned cash! Well done...we need more people like you investing in this beautiful place!!! Now, you need to know how much on top of the Purchase Price is the property going to cost.
Firstly, you'll need to know how the property you want is owned. There are lots of different ways, but basically they all fall in to one of three categories:
1. The property is owned in a personal name.
2. The property is owned or has shares in a company.
3. The property is held in a trust.
Ok, so your dream property is owned by an individual. You will be paying 7% of the purchase price to have the property transferred to your name, or a company name. The 7% is made up as follows: 3% conveyancing fees to the lawyer doing the transfer, and 4% stamp duty paid to ZIMRA for transfer fees. (This 4% is the maximum you will be charged and it is calculated on a sliding scale depending on the value of the property.) It is always better to budget for more so there are no NASTY surprises!
If the property is in a company name...lucky you...you won't be paying 7% extra! You'll probably have to pay accounting fees to have the directors' names changed and new share certificates issued in your name. But this is minimal in comparison. Budget on 1% of the Purchase Price for the accounting fees. (Remember that share block ownership...flats and industrial units in a block, will have this type of sale. You basically buy shares in the company that owns the whole block, and you won't get title deeds for this property.)
The third way a property may be held is in a Trust. The costs involved are similar to the Company sale, but may involve some lawyer's fees to change the Trustees and Beneficiaries of the
Trust. The director's of the company owned by the trust will also have to be changed. The structure of a Trust looks like this:
ABC (Pvt) Ltd
99 Fantasy Drive, Dreamland
Buying property can be a costly business and you need to make sure you have been advised by an expert before you even try and go down this road. It is a stressful time in your life, and seeking professional help will give you peace of mind.
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Advice to Landlords In Zimbabwe
In most cases, property is your biggest investment and it is important to ensure that if you rent it out, it will be taken care of. So often, tenants devalue your property by their mistreatment, neglect and abuse of your most prized possession. If you are a non-resident landlord, it is essential to employ a reputable estate agent to manage your property and protect your investment.
Most estate agents do inspections at the start and end of a lease. But, a good agent will do random inspections, in order to check that the property is being maintained: the pool should be full and blue, the garden should be cared for and the house should not be overcrowded or unclean. It also helps to identify potential problems early on, if inspections are done regularly.
A good agent will also ensure that all utility bills are paid up to date. At the moment, in Zimbabwe, so many homeowners are in arrears with their utility bills that City of Harare is now taking legal action and trying to attach the properties which are in arrears. Can you imagine your shock and horror, if your property is taken from you because of unpaid bills that you thought your tenants were paying??? It doesn't bear thinking of!
Choosing the right tenant from the onset is ESSENTIAL, as the Rent Board in Zimbabwe favours the tenants and it is very difficult to have them evicted even for the non-payment of rent and utility bills. The Rent Board will also decide what is a fair rent, if the rental is ever disputed. These rent dispute cases can take years to come to court and in the meantime, you, the landlord will be earning a pittance on your rental. The right Estate Agent will vett all potential tenants and do credit checks on the prospective tenants so that you have as informed a decision as you can possibly make about the people who will be living in and caring for your valuable asset.
At the moment, without first seeking approval from the Reserve Bank of Zimbabwe, all rental revenues are legally permitted to be remitted to anywhere in the world that the landlord resides. So, investing in Zimbabwean property for lease is an excellent way to secure your money and earn a passive income from anywhere in the world, as long as you have a great tenant and a fantastic agent! There are no restrictions on foreign investors buying property in Zimbabwe. The property market has continued to appreciate on a consistent basis since 2000. So, if you have money to invest, property in Zimbabwe is a very good option. You will get a fantastic return on your money, and when you eventually sell, you will be able to remit your money back to the country of origin, provided you have followed the correct process to bring the money into the country initially.
For advise and help with residential and commercial leasing, contact Page Properties.