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What is CGT and how does it apply to you?

by , 02 April 2014
There's a lot of confusion regarding Capital Gains Tax (CGT). For instance, some taxpayers think CGT is a separate tax. This isn't true. CGT forms part of income tax and you can't escape it if it applies to you. If you want to avoid making mistakes like these, continue reading to find out more about CGT so you can comply with tax law and avoid a 200% penalty.

What exactly is CGT?

Capital Gains Tax (CGT) in South Africa is a tax you pay on the profits you make on the disposal (sale) of your assets.

Our experts at FSP Business say 'every time your business sells, donates or scraps an asset and it makes a profit, SARS takes a big bite out of the proceeds. And it calls this bite CGT.'

But do you have to pay it?


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Is CGT applicable to everyone?

According to SARS website, CGT in South Africa applies to individuals, trusts and companies.

SARS also explains in its website that a resident, as defined in the Income Tax Act 58 of 1962, is liable for CGT on assets located both in and outside South Africa. A non-resident is only liable to CGT on immovable property in South Africa or assets of a 'permanent establishment' (branch) in South Africa.

Note: Certain indirect interests in immovable property such as shares in a property company are deemed to be immovable property.

Retirement funds are fully exempt from CGT and some Public Benefit Organisations may be fully or partially exempt.

Warning! SARS will hit you with harsh penalties if you fail to declare CGT.

If you try to escape CGT, SARS could find you guilty of tax evasion and smack you with a 200% penalty!

When it comes to CGT, the onus is on you to declare all your gains and losses, to calculate your due taxes correctly and to pay SARS on time, warn our experts at FSP Business.

There you have it. Now that you know what CGT is, make sure you comply with tax law to avoid penalties of up to 200%.

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