Capital Gains Tax
Category Advice
Capital Gains Tax
Article Provided by Leanne Jooste, B Law Inc. Attorneys
What is Capital Gains Tax?
On 1 October 2001, Capital Gains Tax was introduced and forms part of income tax. This tax usually becomes applicable when taxpayers' investment property is sold for a profit (gain) i.e., the proceeds/selling price is more than the "base cost."
The "base cost" is the purchase price plus any amounts spent on renovations or improvements, plus a few other smaller costs. This profit (or capital gain) is taxed at a lower rate than normal income due to the fact that only a portion of the capital gain (currently 40%) is included in taxable income, and not the full profit.
To whom does it apply?
Capital Gains Tax is applicable to individuals, trusts, and companies.
A resident, as defined in the Income Tax Act 58 of 1962 is liable for Capital Gains Tax on assets located in both in and outside South Africa.
A non-resident is liable to Capital Gains Tax only on immovable properties in South Africa or assets of a "permanent establishment" or branch in South Africa. Certain indirect assets in immovable property such as shares in a property company are deemed to be immovable property.
Exemptions
Capital Gains Tax is not applicable in the following instances:
- R2 million gain or loss on the disposal of a primary residence (the home in which a person lives). This means that the first R2 million of your capital gain is exempt from tax;
- most personal use assets;
- retirement benefits;
- payments in respect of original long-term insurance policies;
- annual exclusion of R40 000 capital gain or capital loss is granted to individuals and special trusts;
- small business exclusion of capital gains for individuals (at least 55 years of age) of R1.8 million when a small business with a market value not exceeding R10 million is disposed of; and
- instead of the annual exclusion, the exclusion granted to individuals is R300 000 for the year of death.
De Lucia Group has been servicing the property industry for over 45 years. Contact us to ensure you get the best advice for all your property-related queries. Michael De Lucia - michaeldl@delucia.co.za
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The information contained herein is not intended to constitute advice and shall only be relied upon by you at your own risk. De Lucia Group does not guarantee the accuracy or completeness of any information posted in this newsletter or otherwise. Any information relied upon by you should be independently verified for accuracy. De Lucia Group reserves the right to change the content distributed or published without prior notice.
Author: De Lucia Group
