Capital Gains Tax (CGT) is a tax on the profit made from the disposal of capital assets, including immovable property. The gain/ profit made by a taxpayer is determined by the difference between the “base cost” of the property and the selling price.
The “base cost” is a wide concept and includes more than just the original purchase price of the property.
You are allowed to include in base cost the original costs of taking transfer of the property, the costs of selling the property [i.e. agent’s commission] as well as the costs incurred in improving the property over term of ownership. The rate of CGT differs depending on the type of entity who makes the gain: 18% for individuals, 21.6% for companies, and 36% for trusts.
There are certain exclusions to the payment of CGT, the most important of which in our context, is the primary residence exemption, where the first R2 million of capital gain (profit) is not subject to tax.
This exemption is only available to natural persons.
The calculation of CGT can be complex, and it is advisable to consult a tax professional.