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Emigrating or immigrating? Remember these CGT rules

by , 27 September 2013
Certain events are regarded as disposals for Capital Gain Tax (CGT) purposes. Migrating or immigrating are two such events. Read on to discover how to apply CGT rules if you're migrating or immigrating.

According to the Practical Tax Loose Leaf Service, a disposal is an event, act, forbearance or operation of law that triggers CGT.

If you're migrating or immigrating, you'll certainly trigger CGT.

The important point here is that you must comply with the law when migrate or immigrate by applying these rules.

Here's how to apply CGT rules if you're migrating or immigrating

Emigration: If you're a South African resident, when you emigrate, or your company is no longer a controlled foreign company, you're deemed to have disposed of your worldwide assets where you're no longer a resident.

This disposal doesn't apply to immovable property or any right to the immovable property. It also doesn't apply where you've acquired the right to obtain shares in terms of a share incentive scheme.

So when you emigrate, you'll realise a capital gain or loss on the deemed disposal of your worldwide assets.

The gain or loss is the difference between the cost of acquisition, (i.e. what you paid to get the assets) and their market value. The realisation of the gain or loss occurs on the day that you emigrate.

If you're a non-resident, you're deemed to have disposed of any asset which:

  • Becomes an asset of a permanent establishment in South Africa by a means other than acquisition.
  • Ceases to be an asset of a permanent establishment.

What about immigration?

If you immigrate to South Africa, or your company becomes a controlled foreign company, you'll be treated as having disposed of each of your assets and acquired each of those assets at their market value on the date of immigration.

This means you won't be liable for CGT in South Africa when you immigrate here.

But the market value of your worldwide assets (on the day immediately before you immigrate) will be the base cost of those assets if you dispose of these in the future.

Now that you know how CGT works if you're migrating or immigrating, make sure you comply to avoid penalties.

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