Capital Gains Tax

Following article written and published by Nolands Chartered Accountants, www.Nolands.co.za

Capital Gains Tax (CGT)was introduced on 1 October 2001. The new tax is included as part of the current income Tax Act by way of a new s26A and an Eighth Schedule.

This means that, although the general provisions of the Act still apply for CGT, the new tax is separately assessed in terms of the Eighth Schedule, and then included as part of the taxpayer's general income tax.

Brief Summary of CGT

CGT is payable on the disposal of assets that take place on or after valuation date, i.e. 1 October 2001;
in the case of South African residents, the tax will apply to disposals of all assets (including overseas assets);
in the case of non-residents, the following assets will be subject to CGT:
 
o immovable property, or any right or interest in a property (this includes a direct or indirect interest of at least 20% held alone or together with any con-nected person in the equity share capital of a company, where at least 80% of the value of the net assets of the company is, at the time of the disposal, attributable to immovable property in SA); and
o any asset of a permanent establishment through which a trade is carried on in SA;
a capital gain or loss is determined by calculating the difference between the proceeds i.e. the amount accruing to the seller, and the base cost of the disposed asset;
base cost relates to the costs directly incurred in acquiring or improving the asset.

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