What is capital gains tax on properties?

In South Africa, the Capital Gains Tax (CGT) is a tax imposed on the profit or gain made from the sale or disposal of an asset, including properties. CGT applies to individuals, trusts, and companies, and it is regulated by the South African Revenue Service (SARS).

Here are some key points to understand about the capital gains tax on properties in South Africa:

• Calculation of Capital Gains: The capital gain is determined by deducting the base cost of the property from the selling price. The base cost includes the acquisition cost, improvement costs, and other allowable expenses.
• Inclusion Rate: The inclusion rate determines the percentage of the capital gain that is subject to tax. In South Africa, the inclusion rate for individuals is generally 40%, while for trusts and companies, it is 80%.
• The tax rate: The more you earn, the higher your marginal tax rate. As of February 2022, the marginal tax rate can range from 18% to 45% depending on your income.

Some things are excluded, for example:

• Capital gains on a primary residence (the residence in which the home seller lives) are excluded up to a rate of R2 000 000.
• If you and your spouse own a joint bond, the exclusion of R2 000 000 is split between the two of you, so you each qualify for an exclusion of R1 000 000.
• Capital gains tax on a second property in South Africa qualifies for an exclusion rate of R40 000.