Should I Buy My Residential Property In My Own Name, In A Company, Or In A Trust?

When purchasing residential property in South Africa, one of the most important decisions is the choice of ownership vehicle. Buyers often ask whether it is better to register the property in their personal name, in the name of a company, or in the name of a trust. Each option carries its own legal, financial and tax consequences.

Below we set out the pros and cons of each option.

1. Buying in Your Personal Name

Pros

• Primary Residence Exemption: When you sell your primary residence, the first R2 million of capital gains is exempt from Capital Gains Tax (CGT).
• Simpler and Cheaper: No need to set up or administer a legal entity. Transfer and ongoing costs are lower.
• Financing: Banks are generally more comfortable granting mortgage bonds to individuals.

Cons

• Estate Duty Exposure: On death, the property forms part of your estate and may attract estate duty.
• Limited Asset Protection: The property is vulnerable to claims by your creditors.
• High Marginal Taxes: Rental income is taxed at your personal marginal tax rate, which can be as high as 45%.

2. Buying in a Company

Pros

• Asset Protection: Ownership is separate from the individual, limiting personal risk.
• Estate Planning Flexibility: Shares can be transferred rather than the property itself, which may simplify succession planning.
• Flat Tax Rate: Rental income is taxed at a corporate rate of 27% (2025), which may be lower than an individual's marginal rate.

Cons

• Capital Gains Tax: Companies pay CGT at an effective rate of 21.6% (higher than individuals).
• No Primary Residence Exemption: Companies do not benefit from the R2 million CGT exclusion.
• Dividends Tax: Profits distributed to shareholders attract an additional 20% dividends withholding tax, creating a “double tax” effect.
• Financing: Banks often require directors or shareholders to sign personal sureties.

3. Buying in a Trust

Pros

• Estate Planning: Assets owned by the trust do not form part of your personal estate, reducing estate duty exposure.
• Continuity: A trust survives the death of its founder or beneficiaries, ensuring long-term planning and asset preservation.
• Asset Protection: Properly structured trusts can shield assets from personal creditors.
• Tax Planning Opportunities: Income and capital gains can be distributed to beneficiaries in lower tax brackets, potentially reducing the overall tax burden.

Cons

• Administration Costs: Trusts require annual financial statements, tax returns and compliance with the Master's Office requirements.
• High Tax Rate on Retained Income: Income retained in the trust is taxed at 45%, making distribution to beneficiaries essential.
• Financing Difficulties: Banks are generally more reluctant to lend to trusts and may require personal sureties.
• No Primary Residence Exemption: Unless a “special trust” is established, the R2 million CGT exclusion does not apply.

Conclusion

• Personal Name: Best for a first-time buyer intending to live in the property as a primary residence.
• Company: Often suitable for investment properties or property trading, but beware of double tax on profits.
• Trust: Valuable for estate planning, wealth preservation and asset protection, but requires proper management and advice.

There is no one-size-fits-all answer. The decision depends on your personal circumstances, tax position, estate planning needs and financing requirements.

Need advice? Before signing an offer to purchase, consult with our property and tax experts to structure the deal in the most effective way.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.