How is Capital Gains Tax calculated on a shopping center - Originally purchased for R 1 000 000.00, and to be sold now for R 8 000 000.00 - What will the taxation rate be?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
The RSA doesn’t have a stand-alone capital gains tax. A ‘taxable capital gain’, which would include all the capital gains for the taxpayer for the year of assessment, is included in the taxable income of the person – see section 26A of the Income Tax Act. The tax rate is the rate, read from the table published in the applicable Rates and Monetary Amounts and Amendment of Revenue Laws Act. The most recent one is the 2019 one and the rates are found in Schedule I.
Whilst the rates of tax may change every year, the inclusion rates are not amended that often. It is only where the seller is not a resident, where section 35A applies, that the normal tax is paid before the end of the year of assessment. In all other instances, the taxable capital gain is taxed on assessment.
The capital gain will be the difference between the proceeds, see paragraph 35 of the Eighth Schedule to the Income Tax Act, and the base cost (see paragraph 20). We accept that the asset was acquired after 1 October 2001.
The current inclusion rate, as it is found in paragraph 10(1) of the Eighth Schedule, is:
A person's taxable capital gain for the year of assessment is –
(a) in the case of a natural person or a special trust as defined in section 1 of the Act, 40 per cent;
There is no exclusion, such as the paragraph 45 one in respect of the disposal of a primary residence in certain instances.