CAPITAL GAINS TAX (CGT)

CAPITAL GAINS TAX (CGT)

Persons subject to CGT

CGT is payable on capital gains that arise after 1 October 2001 by the following persons:

  • Residents are subject to CGT on all assets including overseas assets;
  • Non residents are subject to CGT on immovable property or any right or interest in a property situated in South Africa and any asset of a permanent establishment through which a trade is carried on in South Africa;

Note: Any right or interest in a property includes a direct or indirect interest of at least 20% held alone or together with any connected 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 South Africa.

Exclusions

The following are the main exclusions from CGT:

  • Primary residences with capital gains up to R2 million;
  • Personal use assets;
  • Retirement benefits;
  • Long-term assurance;
  • Small business assets with capital gains up to R1.8 million (applicable when a person is over the age of 55 where the maximum market value of the small business assets does not exceed R10 million).
  • Annual exclusion for natural persons: R40 000;
  • Annual exclusion on death for natural persons: R300 000;

Calculation and inclusion rates

A capital gain or loss is calculated separately in respect of each asset disposed. Once determined, gains or losses are combined for that year of assessment and if it is:

  • an assessed capital loss, it is carried forward to the following year; ¬†or
  • a net capital gain, it is multiplied by the inclusion rate and included in taxable income.

The inclusion rates are as follows:

PERSON RATE
Natural person and special trust 40%
Company 80%
Trust 80%

Withholding tax

The purchaser must withhold CGT on the purchase price where assets are purchased from a non-resident except where the amount payable by the purchaser is less than R2 million. The following withholding tax rates are applicable and are based on the proceeds on disposal:

NON-RESIDENT SELLER RATE
Natural person 5%
Company 7.5%
Trust 10%