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Here's how to use a building valuation certificate to cut your tax bill

by , 12 September 2014
The rule of Capital Gains Tax (CGT) is if you make a profit from an asset, you pay SARS tax on it. So the value of that asset pays an important role in your CGT liability.

One of your most important and expensive assets is your building. That's why you need to get a valuation certificate to prove the base value of the building.

But did you know, you could also use the certificate to cut your tax bill?

 

A valuation certificate will help you cut your tax bill. Here's how

 
CGT laws outline three different ways you can determine the base cost of an asset. This ultimately determines how much the capital gain is and tax you'll pay on the disposal of the property. 
 
Having a valuation certificate will give you the choice to use any of the three methods. Without a certificate, your choice is limited to the first two methods which could result in higher taxes. 
 
Here's what these methods are.
 
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Three methods to determine the base cost of your asset

 
1. The 20% of proceeds method: This simply means 20% of the selling price or proceeds on disposal.
 
2. Time apportionment method: Here, your proceeds are equal to the period of ownership in relation to the total period plus the original cost.
 
3. The market value: This is where your valuation certificate will help you by showing the accurate market value. 
 
If you get your valuation certificate, you have all three methods available to determine the base cost instead of only the first two. You may then choose the one that gives you the greatest benefit. 
 
So get your building valuation certificate and ensure you never pay more CGT than you should.


Recommended Product: Capital Gains Tax 101. Your ultimate guide to slashing Capital Gains Tax.


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