How to Legally Not Pay Taxes on Purchased Property
Who here loves paying taxes? Anyone? I didn’t think so. Personally, they’re the bane of my existence. And I know I’m not alone! When consulting with potential investors, one of the biggest concerns they have is the cost of taxes when purchasing property. After all, property investment can make you rich, but not if you’re giving away all of your rental income!
So, how can you purchase property without paying taxes? The answer is by using a shelf company to purchase your property.
Using this option, you won’t need to worry about paying exorbitant taxes, breaking the law or even posing any suspicious activity. I not only suggest that potential and novice property investors use this strategy, but I have also used it myself.
Using a shelf company is better than buying property in your personal capacity for several reasons. First of all, when you buy property in your personal capacity, only the net income from your rental property can count as taxable income. This can have an impact on your taxes depending on your tax bracket.
When you buy a property using a shelf company, you are able to side step paying taxes all together. Here’s how. Your income from your rental property will likely be greater than 20% of the company’s total income- as the only use of the shelf company is to purchase property. This means that your company would be taxed at the corporate tax rate of 28%, but you are able to get that money back by drawing an income back to yourself. This action is tax deductible.
Alternatively, you could distribute dividends following any business taxes. While easily doable, it can be confusing to navigate taxes and shelf companies as a beginner investor. Without a mentor, it can become overwhelming. One of my goals is to help South Africans build wealth through property investment, which is why I offer several consulting services, courses and mentorship options. Contact me to learn more!
If you’re interested in purchasing property, don’t let the topic of taxes scare you off. In fact, more likely than not, the tax system will work in your favor when you purchase property. If you follow any of the outlined methods above, you can purchase a property without paying any taxes at all- legally! It’s every investor’s dream.
There are so many ways to invest in real estate- and build wealth- without paying loads of money up front or during the process. For more information on how to invest in real estate with no money down, download my FREE ebook! To learn more about property investment, you can read through my blog or contact me for a 1:1 consultation.
Calling all real estate investors and those interested in investing! From 28th September-1st October, I will be hosting a virtual summit on the digitalisation of real estate. The top 20 proptech companies in South Africa will be coming together to teach on how to digitalise your real estate investments in the midst of a pandemic. This virtual event will be hosted every day from 9am-12pm. Spots will be limited so be sure to pre-book before August 30!