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Enjoyment Versus Profit is the Key to Being a Collector
- 17 July 2013
- Individuals Tax
- David Warneke
Important:
This article is based on tax law for the tax year ending 28 February 2014.
Author: David Warneke (Moneywebtax)
As long as the aesthetic value and enjoyment are uppermost in investors' minds when buying luxury items such as paintings and antiques and these items are not otherwise used in carrying on a trade, for example by charging customers a viewing fee, no income tax or capital gains tax will be payable when disposing of these assets. If the dominant intention however is to make a profit on the eventual sale or the items, on the other hand, the proceeds will be regarded as having been derived from trading and will be subject to normal income tax.
Assets for personal use held by natural persons as opposed to other juristic persons, are excluded from capital gains tax, which means that South African art- and antique-lovers can happily expand their personal collections without worrying about tax interfering with their enjoyment of these collectibles.
What's more, while enjoying their acquisitions, collectors can even entertain the notion that should they one day consider selling an item or two, they might make a bit of a profit, tax-free. After all, it would be unnatural to make any investment without contemplating the future value of that investment. Sars recognises this.