Capital Gains Tax

Capital gains tax (CGT) is not a separate tax but forms part of income tax. A capital gain arises when you dispose of an asset on or after 1 October 2001 for proceeds that exceed its base cost.
 
The relevant legislation is contained in the Eighth Schedule to the Income Tax Act 58 of 1962.
 
Capital gains are taxed at a lower effective tax rate than ordinary income. Pre- 1 October 2001 CGT capital gains and losses are not taken into account. Not all assets attract CGT and certain capital gains and losses are disregarded.
 
A withholding tax applies to non-resident sellers of immovable property (section 35A). The amount withheld by the buyer serves as an advance payment towards the seller’s final income tax liability.
 

Who is it for?

CGT applies to individuals, trusts and companies.
 
A resident, as defined in the Income Tax Act 58 of 1962, is liable for CGT on assets located both in and outside South Africa.
 
A non-resident is liable to CGT only on immovable property in South Africa or assets of a “permanent establishment” (branch) in South Africa. Certain indirect interests in immovable property such as shares in a property company are deemed to be immovable property.
 
Some persons such as retirement funds are fully exempt from CGT. Public benefit organisations may be fully or partially exempt.

 

How does CGT work in relation to an inheritance?, click here for more information

Last Updated: 11/01/2016 9:09 AM     print this page
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 Top FAQs

What is base cost?
Base cost is the amount against which any proceeds upon disposal are compared in order to determine whether a capital gain or loss has been realised.

Will the sale of my primary home be subject to CGT?
For the 2013 year of assessment the first R2 million of a capital gain or loss on disposal of a primary residence must be disregarded (2007 to 2012: R1,5 million).

What is a primary residence?
A residence must meet certain basic requirements before it can qualify as a primary residence (Paragraph 44 of the Eighth Schedule).

What will the effect of CGT be when calculating the deduction for donations, medical, pension and retirement annuity fund contributions?
The impact of a taxable capital gain on the calculation of certain deductions is as follows: Donations Under section 18A(1) of the Act a person is entitled to a deduction for qualifying donations

Who should have done the valuation? By what date should my property have been valued? Who must hold the valuation certificates? When must valuations be submitted and to whom?
5.1 The taxpayer disposing of the asset was responsible for any valuation submitted to SARS. Depending on the nature and value of the asset concerned, the taxpayer should have considered obtaining expert advice, but this was not compulsory.