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Do you understand these five key concepts of Capital Gains Tax?

by , 29 May 2014
Whenever your company sells, donates or scraps something, SARS wants a piece of the pie. That piece is called Capital Gains Tax (CGT) and it can end up taking a lot of your income.

Even worse you'll end up paying more in penalties if you don't calculate your CGT correctly or fail to declare your gains.

But if you take the time to understand these five concepts of CGT, you'll be able to calculate it like a pro.

Avoid 200% tax penalty

The five key concepts of CGT explained

The Practical Tax Loose Leaf advises you first understand these concepts before you even think about trying to calculate Capital Gains Tax as part of your company tax. 
The five concepts are:
1. Assets;
2. Disposals;
3. Proceeds;
4. Base costs; and 
5. Valuation date.
So what do these concepts mean?
12 Taxable fringe benefits - are you taking advantage of all of them?
There are hundreds of companies out there that don't know which fringe benefits are taxable or they land up taxing the wrong percentage on them... 
This kind of error could cost you thousands in penalties to SARS if it catches you out – and it will!

The meanings behind the five key concepts of CGT

These nine assets are subject to CGT:
1. Main company residence;
2. Additional property (holiday homes and second homes);
3. Some boats;
4. Caravans;
5. Some aircrafts;
6. Shares, unit trusts and private investments;
7. Krugerrands, or other silver, gold and platinum coins;
8. Your business sales; and
9. All capital assets (taxable income).
Disposal can include things such as sales or donations, forfeiture and termination and even scrapping or loss of an asset.
This is any amount of money you get from the disposal of an asset.
Base Costs
This is what you actually spent when you first acquired the asset.
Valuation Date
This is simply the date the CGT came into effect on the 1st October 2001.
With those five concepts behind you, you'll soon be calculating Capital Gains Tax with no hassle at all. 

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