Summary
Ch 17 - Capital Gains Tax summary
- Course
- Tax 399 (TAX399)
- Institution
- Stellenbosch University (SUN)
This document contains a summary of chapter 13 part 2 as well as chapter 17 Capital gains tax
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CH 13 PART 2 – ALLOWANCESS8(4)(e) – Deferred Recoupment of Allowances
TP replaced one asset with another (replacement asset) AND
Elected application of – par 65 or 66 of the 8th Schedule
Amounts recouped by TP upon disposal – will not be included in his income in year of
disposal – will be deferred
Depreciable asset (par 66) – incl recoupment as wear + tear claimed s8(4)(eB)
Non-depreciable Asset – incl. recoupment in full once sold s8(4)(eC)
Alienation, Loss or Destruction Allowance – s11(o)
Proceeds (Ltd to CP) - Tax value = a negative amount
Only avail – on election of TP (if not – capital loss)
Qualifying depreciable asset – useful life not >10 years
Only if asset – alienated, lost or destroyed
S11(o) NOT Allowed if:
- Asset was never used
- Asset sold to connected person
- Disposal did not take place in the YOA which a claim
For allowance was made
Limitation of Losses from Disposal of Certain Assets – s20B
Disregards a s11(o) allowance – if the full consideration for a disposal does not accrue
to a person in the current YOA (unquantifiable s24M)
Disposal can trigger an initial loss – which doesn’t actually result in a loss when the full
consideration accrues
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,CH 17 – CAPITAL GAINS TAX
Par 2 – Persons Liable for Payment of CGT
All persons – subject to CGT (whether registered or not)
RSA Resident – CGT on any asset (inside or outside RSA)
Non-Resident: CGT only on:
1. Immovable property (and interest in immov prop) – in RSA or
2. Asset attributable to a permanent establishment – through which non-resident
carries on trade in RSA (s9J) and s9(2)(j)
Interest in Immovable Property s9J
- At least 20% interest in a company AND
- At least 80% of MV of shares is attributable to immovable prop in RSA
S35A – Withholding Tax
If a non-resident – sells immovable property (or interest) in RSA
Purchaser withholds amount – on behalf of non-resident and pays over to SARS
Only if amount payable - >R2 million s35A(14)(a)
7.5% if seller is NP
10% if seller is company
15% if seller is a trust
CGT Terms (par 3-10)
Annual Exclusion – par 5 (40 000)
Only for individuals and special trusts
Reduces – sum of CG and CL above
May not move from + to – amount
Unused amount – may NOT be carried forward to next year
Annual exclusion for deceased – in year that he dies par 5(2) (300 000)
Net Capital Gain – par 8: % included in taxable income (s26A) par10(1)(b)
Natural Person – 40%
Company – 80%
Net Capital Loss – par 9 – NOTHING included in TI
Carry forward to next YOA
Asset Definition – par 1
2
, Property of any nature
Movable or immovable, corporeal or incorporeal
Includes – any coin made mainly from gold or platinum and
A right or interest of whatever nature to or in such property
EXCLUDES – any currency
DISPOSALS
Disposal Events – par 11(1)
Any event, act or operation of law leading to
Creation, variation, transfer, extinction of assets
E.g. sale, donation, exchange, destruction of asset
Non-disposals – par 11(2)
Event deemed not a disposal – no CGT effect
E.g. asset transferred as security for debt, issue of a bond
Deemed Disposals (par 12 & s9H)
Although not an actual disposal – it is deemed to be
Purpose of par 12 – calculate CG/CL or determine a new base cost
If scenarios in par12(2) occur – TP deemed to dispose assets at MV
AND reacquired those assets - at same MV for par 20(1) (base cost)
Scenarios of Deemed Disposals
1. Non-resident -> Resident – Base cost = MV par 12(2)(a)(i)
2. Resident – Non-Resident – Proceeds = MV, calculate CG/CL
- Deemed to have disposed of all assets s9H(2)
- Except immovable property in SA s9H(4)
- Disposes of interest in immovable property – on date of emigration
3. Asset of a non-resident – becomes asset of PE in SA -> BC = MV par12(2)(b)(i)
4. Asset ceases to be asset for PE in SA – Proceeds = MV, calculate CG/CL par12(2)(b)(ii)
5. Capital Asset becomes Trading Stock par12(2)(c) – Proceeds = MV, calculate CG/CL
- Trading Stock acquired at MV – s22(3)(a)(ii) CP=MV for s22(2)(b) deduction
6. Trading Stock becomes capital asset par12(3) – Proceeds = MV, gross income
- S22(8) recoupment
- Use MV – for calculation of capital allowances
7. Personal-use Asset – ceases to be held as PUA par12(2)(d) – BC = MV
8. Non-PUA becomes a personal-use asset par12(2)(e) – P = MV, calculate CG/CL
Time of Disposal – Par 13
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