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Two easy ways to lower your capital gains tax burden!

by , 06 March 2013
Capital gains tax. Three words that tend to send a shiver down a business owners' spine. Because you know you're obliged to pay CGT on your capital assets, but there are constant changes to this area of tax. Luckily, recent changes to CGT are actually to your business' benefit - find out how you can now legally reduce the CGT your business pays over to SARS!

The implementation of the Real Estate Investment Trust (REIT) structure in South Africa's commercial property sector is likely to be "credit-positive" for the industry, says the Business Day's BD Live website.
That's because REITs are internationally recognised, so they'll offer a number of benefits to South African property companies.
But they also offer a great way to legally pay less capital gains tax or CGT.
Here's how Real Estate Investment Trusts help you legally pay less CGT
By investing in property through REITs, your business is exempt from paying capital gains tax when selling these assets.
Because CGT is usually calculated on the amount by which the proceeds from the sale exceed the base cost of the asset, says FSP Business.
But by getting the REIT to dispose of the property for you, you won't have to worry about a 200% penalty from SARS for the disposal of assets at the wrong time.
And from 1 April, any qualifying company with a tax year starting on 1 April or after can adopt the new SA REIT structure at the start of its tax year, says FSP Business.
The deferred tax liability is also removed from your balance sheet, which increases your net asset value.

So far, it's a win-win.
Another way to pay less capital gains tax: Reduce the base cost of your assets!
Capital gains tax will also be less of a nightmare in future as a change to the Taxation Laws Amendment Bill means you'll effectively pay over less capital gains tax when you cancel or reduce a debt, says the Business Day's BD Live website.
 FSP Business says you can do so by reducing the base cost of an asset on which capital gains will be levied in future.
There you have it! Do your research now to get ahead of the pack and legally avoid CGT!

If you want to find out more about capital gains tax, get your hands on the Practical Tax Loose Leaf. In the Practical Tax Loose Leaf we've got a dedicated chapter on capital gains tax. In it you'll discover:
  • 3 Situations where you don't have to pay capital gains tax
  • 4 Tips on re-organising your business to minimise capital gains tax
  • 3 Rules relating to entities

Get the Practical Tax Loose Leaf here...

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