South Africa Capital Gains Tax Guide (CGT)

CGT Inclusion Rates

• Individuals and special trusts — 40%: 40% of the net capital gain is included in taxable income and taxed at the individual's marginal IIT rate (up to 45%). The effective maximum CGT rate for individuals is 40% × 45% = 18%.
• Companies and close corporations — 80%: 80% of the net capital gain is included in taxable income. The effective maximum rate is 80% × 27% = 21.6%.
• Other trusts — 80%: Trusts that are not special trusts include 80% of capital gains, with an effective max rate of 80% × 45% = 36% (trusts are taxed at the maximum marginal rate).

Annual Exclusions

• General annual exclusion — ZAR 40,000: Available to individuals each year of assessment. The first ZAR 40,000 of net capital gain is disregarded.
• Exclusion on death — ZAR 300,000: In the year of death, the annual exclusion is increased to ZAR 300,000. This covers deemed disposals of assets at death (CGT is triggered on death for most assets).
• Companies and trusts do not qualify for any annual exclusion (except special trusts).

Primary Residence Exclusion

• ZAR 2 million exclusion: The first ZAR 2 million of capital gain on the disposal of a primary residence is excluded from CGT for individuals and special trusts.
• The property must be used mainly (more than 50%) as the taxpayer's primary residence. The exclusion applies to the residence and the land on which it stands (up to 2 hectares).
• If the residence was not used as a primary residence for the entire ownership period, the exclusion is apportioned based on the period of primary residence use.
• Portions of the property used for business purposes (e.g., home office) reduce the exclusion proportionally.

Calculation of Capital Gain

• Proceeds: The amount received or accrued on disposal of the asset (selling price).
• Base cost: The cost of acquiring the asset, including purchase price, transfer costs, legal fees, and improvement costs (not maintenance).
• Capital gain: Proceeds minus base cost. If base cost exceeds proceeds, a capital loss arises (which can be offset against capital gains in the same year or carried forward).
• Capital losses: Can only be set off against capital gains — not against ordinary income. Unused capital losses are carried forward to future years.

Deemed Disposals

CGT is triggered on certain events even without an actual sale:

• Death: Assets are deemed to be disposed of at market value on the date of death (subject to the ZAR 300,000 annual exclusion). The estate is liable for CGT.
• Emigration: Individuals who cease South African tax residency are deemed to have disposed of their worldwide assets (excluding immovable property in SA) at market value.
• Donations: The donation of an asset is a disposal for CGT purposes at market value (though the annual donations tax exemption may apply).
• Change of use: If an asset changes from private use to business use (or vice versa), a deemed disposal at market value occurs.