In South Africa, capital gains tax (CGT) is a tax levied on the profit or gain that individuals or entities make when disposing of an asset.
This tax is applicable to a wide range of assets, including real estate, shares, and other investments.
Here are key points to understand about capital gains tax in South Africa:
- Applicability:
- CGT is applicable to South African residents, non-residents who own immovable property in South Africa, and certain trusts.
- Taxable Assets:
- Common assets subject to CGT include real estate, shares, business assets, and other investments.
- Exclusions:
- Certain assets are exempt from CGT, such as personal-use assets (e.g., a primary residence), certain government bonds, and vehicles.
- Calculation of Capital Gain:
- The capital gain is calculated as the difference between the proceeds from the disposal of the asset and the base cost (acquisition cost plus improvement costs). The net gain is then subject to CGT.
- Inclusion Rate:
- The inclusion rate determines the portion of the capital gain that is subject to tax. The inclusion rates for individuals were as follows:
- 40% for individuals
- Annual Exclusion Threshold:
- Individuals are entitled to an annual exclusion threshold. As of January 2022, the first ZAR 40,000 of capital gains for individuals is exempt from CGT.
- Primary Residence Exclusion:
- There is a primary residence exclusion that provides relief for individuals selling their primary homes. A portion of the capital gain on the sale of a primary residence may be exempt from CGT, subject to certain conditions.
- Submission and Payment:
- CGT is typically calculated and declared as part of an individual’s annual income tax return. Payment is due at the time of submitting the tax return.
- Losses:
- Capital losses can be offset against capital gains, reducing the overall tax liability. However, there are specific rules regarding the offsetting of losses.
- Changes in Legislation:
- It’s important to note that tax laws and rates are subject to change. Always consult with a tax professional or the South African Revenue Service (SARS) for the latest information.
- How to calculate capital gains tax South Africa 2023?
- For example: If a home had sold for R6,000,000, and the profit is R2,900,000. Because the first R2 million is exempt, CGT would be calculated on the remaining R900,000.
- CGT would then be calculated at 18%* for individuals (R162,000) or at 36%* (R324,000) for a property purchased through a trust (*according to SARS as at 2023).
- What costs can be deducted from capital gains tax?
- Before you calculate your final Capital Gains Tax bill, you can make certain allowable deductions including: Private Residence Relief. Costs of buying and selling the property, including Stamp Duty, solicitor fees and estate agent fees. Eligible costs of improvement such as an extension, a renovation or a new kitchen.
For the most up-to-date and accurate information on capital gains tax in South Africa, it is advisable to consult with a tax professional or refer to the latest guidelines provided by SARS.
