Capital Gains Tax is a tax on the profit made from the sale of certain assets. In South Africa, Capital Gains Tax is regulated by the South African Revenue Service (SARS). If you are a resident in South Africa and you sell an asset, you may be liable for Capital Gains Tax. The amount of Capital Gains Tax you need to pay depends on various factors.
How is Capital Gains Tax calculated?
The amount of Capital Gains Tax you need to pay is calculated by subtracting the base cost of the asset from the selling price. The base cost includes the amount you paid for the asset and any costs incurred to acquire, maintain, or improve the asset.
If the asset was acquired before 1 October 2001, you may use the market value of the asset as at that date as the base cost. However, if you do not have the necessary records to determine the base cost, the base cost is deemed to be the market value of the asset as at 1 October 2001.
The amount calculated is then added to your income for the tax year and taxed according to the tax tables.
What is the Capital Gains Tax rate in South Africa?
In South Africa, Capital Gains Tax is calculated at a flat rate of 18% for individuals and special trusts, and 22.4% for companies and other trusts. However, the actual rate could be lower depending on your income tax bracket and the annual exclusion amount.
The annual exclusion amount for individuals is R40,000, and it is R300,000 for individuals over the age of 65. This means that if your capital gain is less than the annual exclusion amount, you will not be liable for Capital Gains Tax.
Example:
If you are an individual and you sold a property for R500,000, and the base cost of the property was R200,000, your capital gain would be R300,000. Since this is below the annual exclusion amount of R40,000, you will not be liable for Capital Gains Tax.
How to declare Capital Gains Tax?
If you sell an asset and you are liable for Capital Gains Tax, you need to declare this on your tax return (ITR12) for the tax year in which the asset was disposed of. If you are uncertain whether you are liable for Capital Gains Tax, you can contact a tax professional or the SARS Contact Centre.
Conclusion
Capital Gains Tax is an important factor to consider when selling assets in South Africa. Understanding the calculation and the rates applicable can help you to make informed decisions and plan accordingly. If you are unsure about anything related to Capital Gains Tax, it is recommended to consult a tax professional for guidance.