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
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.
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
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