I have a client who earned an amount that should be taxed per capital gains. According to the tax calculator supplied by SARS, they have included the amount (after the annual R 40, 000 exclusion and 40% inclusion) as an earnings amount. This has resulted
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We don’t agree with your understanding of the issue. Under section 26A, of the Income Tax Act, a taxable capital gain is included in the taxable income of a person for a year of assessment during which the asset was disposed. See also the meaning of the phrase ‘taxable income’ in section 1(1) of the Act.
The tax payable by the individual is then calculated, according to the rate in the annual Rates Act. The RSA doesn’t have a stand-alone capital gains tax. The issue was explained as follows in the 2001 Explanatory Memorandum:
It was decided to incorporate the CGT as an integral part of the Income Tax Act as CGT is regarded as a tax on income.
This approach has administrative advantages as the existing provisions and procedures of the Income Tax Act can be used to collect CGT. If CGT was introduced as a separate tax, provisions would have had to be introduced for matters such as returns, assessments, payment and recovery of tax, and objection and appeals, which are already provided for in the Act.