How to Invest
In the USA, South African and Canadian investors fall under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).
It is essential to operate your property investment company in strict accordance with USA and South African laws, so at TripleNet Investors we ensure that the professionals employed have the necessary experience to handle both the legal and financial components correctly on your behalf.
Rest assured, TripleNet Investors only uses trusted professionals both for legal (USA Attorneys & South African Attorneys) and accounting (Klasco Partners & the TripleNet Investors Team). These professional know their oats! All the tax affairs of your property investment company and the records thereto, are available for perusal at your discretion.
As a foreigner and in order to buy a property in the USA, it is critical that that the correct financial structures, that comply with USA law, be set up in advance. Our legal and financial experts recommend the set up of a Limited Liability Company to hold the properties acquired.
There are three absolute steps that need to take place to comply with all USA legal requirements and to minimize and safeguard your investment risk:
1. The Correct Structure for Your US Investment
As alluded to above, the preferred investment vehicle is that of a Limited Liability Company (LLC). In addition to the registration of the LLC and the members (individual shareholders of the LLC), for tax purposes, bank accounts need to opened and your funds from South Africa need to be transferred. This all needs to be done legally, correctly and quickly, before a South African can safely purchase property in America.
There are numerous advantages and benefits to holding properties in separate LLC’s, the most obvious of which is to limit your liability in the event your investment has issues arise. Due to the litigious nature of the US, anyone can sue anyone else for anything, so be prepared and lower your risk by holding any properties acquired, in the correct financial entities. Remember that there are tax benefits in holding the properties in separate LLC’s.
The LLC is required to be registered with the IRS (Internal Revenue Service) for tax and will be allocated a USA Employer Identification Number (also called a Federal Tax Identification Number). Your LLC will have to have this number before it can be registered.
2. Opening of Bank Accounts and Transfer of Funds
Once your LLC is set up and registered, the bank accounts need to be opened in the name of the company. Then the LLC will need your South African funds necessitating the money transfer from South Africa to the LLC’s operational bank account in America. TripleNet Investors will facilitate all of these processes for you and charge a onetime setup fee to get the structure in place.
In conjunction with our law firm, TripleNet Investors will facilitate the opening of a bank account(s) on behalf of the LLC.
Our certified public accountant will manage your acquisition. All bookkeeping and records are stored securely online and you will have access to them 24/7.
3. Management – Legal and Accounting
For your information, should you ever sell one of your American properties, the IRS (Internal Revenue Service) can withhold 10% of the sales price of that property to ensure that U.S. taxation of gains realized on disposition of such interests, is complied with accordingly. Application can be made to have this amount reduced to the actual tax amount due prior to a sale.
We will facilitate your Forex transfer by using a third party company, based in South Africa, who are registered with the Financial Services Board, to handle the transfer of your funds from South Africa to the USA, legally, efficiently and expeditiously. This company offers better rates than the banks and have no fees for certain size transactions. Included in their service is the obtaining of tax clearance certificates from the South African Revenue Services in order to facilitate the transfers.
The South African Reserve Bank has strict regulations regarding foreign investment and TripleNet Investors ensures every transaction is consummated in strict adherence to the law.
The South African Foreign Investment Allowance applies to all taxpayers over the age of 18 years old and represents an annual total allowance (per calendar year) of R4 million per individual tax payer. You can, however, apply to the SARB to have this amount raised if you want to move more than R4 million.