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Two common events that trigger Capital Gains Tax

by , 12 August 2014
Capital Gains Tax (CGT) is every taxpayer's worst nightmare. Whether you pay it as a business owner or an individual, there's nothing fun about giving SARS some of your profits.

The best way to protect your bank accounts and profits from SARS' greedy fingers is to know as much as you can about CGT.

To help you stay informed, we're revealing two common events that trigger Capital Gains Tax...

 

These two events trigger Capital Gains Tax

 
When you dispose of an asset SARS takes part of the profit or capital gain from it. In these two events, SARS regards your actions as an asset disposal and this is why you must pay Capital Gains Tax.
 
Event #1: Change in residence
 
If you emigrate and take your company with you or it is no longer under the control of a foreign company (if you live in SA), SARS sees this as a disposal of your worldwide assets. This disposal doesn't apply to immoveable property or any right you may have to immoveable property. 
 
When you emigrate, you release a capital gain or loss through this 'disposal' of your worldwide assets. 
 
If you immigrate to SA then your company falls under the control of a foreign company. SARS also sees this as a disposal of your assets which you then regain when you arrive in SA. This means when you move to SA you aren't liable for CGT. BUT the cost of moving your assets becomes part of their base costs if you sell them in future.
 
Here's the second event that triggers CGT.
 
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Event #2: You start holding investment assets as trading stock

 
If you hold your investment assets as trading stock, SARS sees this as a disposal of these assets. The reason is you changed the purpose of the assets. 
 
There you have it, these two situations have clear CGT consequences. Ensure you're aware of them so SARS doesn't catch you by surprise. 

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


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