Here's what you need to know about CGT before you sell your company's Krugerrand collection to free up some cash!
Buying gold coins as an investment is a great profit making-move. Many businesses are realising this, with the smallest American Eagle coins proving so popular in recent times that the US Mint has run out of stock! If your company's invested in a collection of Krugerrands that you intend to sell for a profit at a later stage, best you beef up on capital gains tax rules, because CGT applies any time you dispose of capital assets like Krugerrand coins!
If you dispose of assets at the wrong time, you could face a 200% penalty from SARS.
But did you know that capital gains tax
applies to Krugerrands or other silver, platinum, or gold-minted coins, or any other coin that's market value is mainly in the metal it is made of?
The reason you're selling or 'disposing of' your company's Krugerrands comes into play...
Because if your company's selling or disinvesting in Krugerrands because you need the funds for necessary expenditures like repaying company loans, there's no longer a profit-making intent, says IOL's Personal Finance
This, in turn, is why Krugerrands are excluded from the definition of personal-use assets.
The Krugerrand ruling prices you'll need to know when it comes to CGT
So the base cost of these coins at the valuation date of 1 October 2001 must be determined when you dispose of them, says SARS
The ruling prices of these coins on 1 October 2001 was R2,750 for a full Krugerrand and R1,202 for a half Krugerrand.
If you want to ascribe other values to these coins as at 1 October 2001, SARS says
your valuation must be motivated and accompanied by documentary proof.
Simple as that!