Hanlies Properties Paarl - Capital Gains Tax - THE LAW IN BRIEF

Since the announcement of the introduction of Capital Gains Tax, there has been much consternation and uncertainty surrounding the topic, particularly with regard to its potential impact on the property market.In its simplest form, a capital gain arises when an asset is disposed of for an amount in excess of its original purchase price, however only the increase in value after 1 October 2001 will be subject to tax. The profit, or the difference, is the capital gain.

The government has proposed that individuals be granted an annual exclusion on the first R12 500 of the gain and pay tax on a quarter (25 percent) of the remaining gain, according to the individual's tax rate. The new law brings the South African tax system into line with those of many other countries such as Australia, USA, Canada, Britain and Botswana. On death a person is deemed to have disposed of all property at market value hence triggering a CGT liability.

For non-residents this deemed disposal applies to immovable property situated in South Africa. In addition on death a person is liable for estate duty at 20% (after deducting a R2.5million abatement from net assets and after deducting any CGT payable by virtue of the deemed disposal of the property). In the case of a non-resident estate duty would be levied on immovable property situated in South Africa (subject however to the terms of any applicable Double Death Duties Act entered into by South Africa with any other State).

The only exception to the foregoing is where a person bequeaths his or her estate to his or her spouse the bequest is exempt from both CGT and estate duty.This information has been produced in conjunction with Smith Tabata Buchanan Boyes Attorneys and serves to answer the most frequently asked questions regarding Capital Gains Tax.We trust that this information will provide you with the necessary knowledge for purposes of more efficient asset management.