An Overview Of Capital Gains Tax In South Africa

What Is Capital Gains Tax (CGT)?

Capital Gains Tax (“CGT”) is a tax that is levied on gains or increases in the value that arise when assets or capital are disposed of.
“Assets” in the context of CGT include capital assets or rights. Examples include a holiday home, Kruger Rands or Intellectual Property.
The “disposal” of an asset refers to an event resulting in a change in the asset such as a change in ownership. Examples include the sale or other alienation of ownership of an asset, forfeiture, loss, destruction of an asset or the decrease of a person’s interest in a company as a result of a value shifting arrangement.
or “deemed disposal”

CGT is payable when the proceeds of the disposal of an asset results in a gain. (In other words, you made a profit on the sale.) If the proceeds result in a loss, there is no CGT payable.
The capital gain (or loss) must be included in a taxpayers’ tax return.

A capital gain is calculated as the proceeds of the disposal of an asset less the base cost thereof.
If the difference between the proceeds and base cost results in a capital gain, CGT is payable.
The capital gain should then be multiplied by the applicable inclusion rate. (The inclusion rate is 40% for individuals and 80% for companies.)

NOTE: SARS allows an annual exclusion of R40,000.00 for individuals.

In the event of the sale or disposal of any asset or right, the proceeds could result in a capital gain.
The sum of the proceeds of the disposal of the asset less the base cost will indicate whether the disposal resulted in a capital gain.
A capital gain (or loss) should be recorded in a taxpayers’ tax return.
This is subject however to certain exclusions such as small business asset exclusions and primary residence exclusions.

Useful guides to CGT are available on SARS’ website for companies and individuals.