Is the profit on sale of depreciated movable assets (trucks) taxed as capital gains or at normal tax rates in a company?
Important:
This answer is based on tax law year ending 28 February 2019.
Answer:
From the facts provided we accept that the taxpayer will not make the election, available under paragraph 66 of the Eighth Schedule to the Income Tax Act.
The matter is then dealt with in section 8(4)(a) of the Act. To the extent that the disposal results in an amount, that was allowed to be deducted under section 11(e) and it has now been ‘recovered or recouped’, there will indeed be an inclusion in the ‘income’ of the taxpayer – see paragraph (n) of the definition of gross income in section 1(1) of the Act.
To the extent that the amount received in respect of the disposal, after ‘deducting’ the recoupment, exceeds the base cost of the asset in question, a capital gain will arise.