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Summary Capital Gains Tax

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A summary of capital gains tax on the sale of assets including the sale of assets before the valuation date.

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  • February 10, 2018
  • 6
  • 2016/2017
  • Summary
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Capital Gains Tax
Where it goes?

Gross Income XXX
Exempt Income (XX)
Income XXX
Deductions/ allowances (XX)
Other inclusions XX
Taxable income XXX


Introduction

 Effective from 1 Oct 2001 (valuation date)
 Applicable to all disposals of capital assets
 Not a separate tax but part of normal tax

Who pays?

 SA Residents on worldwide disposals
 Non-Residents: fixed prop, interest in fixed prop, assets connected to a
permanent est

Basics

Proceeds XXX

Base Cost (XX)

Capital gain/loss XX/(XX)

 Tax is based on net gain
 Natural person’s get annual exemption which reduces gains or losses
 Separate calc for each asset
 Net loss carries over to next year to reduce gain next year




Framework for CGT

, Step: 1

1. Asset involved?
2. Capital in nature?
3. Disposed of in terms of CGT?
4. Calculate economic or accounting profit / loss

Step: 2

Calculate all gains and losses accounting for exclusions

a) Asset
 Broad definitions including fixed property, intangibles, precious coins,
goodwill
b) Disposal
 Acts or operation of law essentially resulting in the transfer, variation or
extinction of asset
 Includes sale, transfer, donation, scrapping, etc.
c) Proceeds
 Amount received or accrued to in relation the asset less certain
exclusions
 Proceeds = SP – Recoupment
 If accrued deemed to be in the current year
 Reduced by any amount repaid in the year
 If a debt to seller is waived or cancelled on sale reduce proceeds
 Not accruing in the year disregard
 Cannot be quantified then not accrued



Base Cost

 Costs of acquisition + cost of adding or improving
 If asset is given for services rendered and is taxed on this value said value
becomes based cost

After VD

 Add Disposal Costs and subtract any allowances

Before VD

© VD val + qualifying expenditure
© VD val greater of: MV or TABC or 20% rule
© 20% rule is 20% of Proceeds less exp after 1 Oct 2001

Kink Tests

Determine historic gain or loss




P>B+A P <= B + A

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