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Thread: Capital gains tax calculation -please help

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    Capital gains tax calculation -please help

    - I buy the property for R1 358 000 and sell it for R2 450 000

    - Gain is R 1 092 000 - 30 000 annual inclusion = 1 062 000 x 33.33% inclusion rate = R353 964.6 added to my taxable income

    - Current taxable income sits at 394440/annum

    - How much added tax will I have to pay as a result of this income? Am I doing this right?

    - The property is in a company and not in my private name

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    Assuming it is in fact a capital gain; there is no annual exclusion for companies. The inclusion rate is 66.6% and the tax rate 28%, unless it is an SBC.

    The bigger question whether or not this is a capital gain. What was the nature of the income derived from the property?

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    This example is hypothetical but is based on real assets.

    I'm not sure what you mean by 'assuming it is in fact a capital gain', how can it not be?

    Residential property was purchased for R1 358 000 and sold for R2 450 000, gain is R1 092 000, right?

    No other income was derived, profits are made from the capital gain realised from the sale.

    What's SBC? So capital gains are levied against the company tax rate of 28%? Then if I want to declare it as a dividend and draw the money out as a shareholder it's another 10% right?

    So..
    Gain is R 1 092 000 - 30 000 annual inclusion = 1 062 000 x 66.66% inclusion rate = R707929.2 added to THE COMPANY'S taxable income

    company tax =R707929.2 X 28% = R198 220,17

    Net = R2 450 000 - R198 220,17= R 2251779,83

    100% declared to share holders R 2251779,83*10% = R225 177,983

    net to shareholders = R 2251779,83 - R225 177,983 = 2 026 601,847

    SARS get total of R423 398,16? Jeezuz

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    Clive is right. If the company's main business is trading in properties then the nature of the income will be trading and then the profit will be taxed at 28% or SBC rates.

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    Thanks guys, I updated my calculations above ^ Can you verify?

    Also the companies main business is rentals, but we're selling one of the units, does this make a difference?

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    Also the companies main business is rentals, but we're selling one of the units, does this make a difference?
    That makes a huge difference. If the intention in acquiring the properties was demonstrably to earn rentals, then the disposal is capital in nature. But if the acquisition was speculative in nature, then it the profit is normal trading income.

    So, if the disposal passes that test, then we proceed to your actual calculation where you have some errors.

    Profit on disposal is R1,092,000

    Determine the net profit excluding the capital gain, for example R2,500,000

    Add 66.6% profit on disposal R727,272.

    Taxable profit is R3,227,272

    Tax is R903,636

    Net after tax is R 2,323,636

    Now you wish to declare, for example R2m in dividends;

    Dividends tax is 15%, so thats R300,000 to SARS and R1.7m to the shareholders

  7. Thanks given for this post:

    Basment Dweller (07-Oct-14)

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    Quote Originally Posted by CLIVE-TRIANGLE View Post
    Profit on disposal is R1,092,000

    Determine the net profit excluding the capital gain, for example R2,500,000

    Add 66.6% profit on disposal R727,272.

    Taxable profit is R3,227,272

    Tax is R903,636

    Net after tax is R 2,323,636

    Now you wish to declare, for example R2m in dividends;

    Dividends tax is 15%, so thats R300,000 to SARS and R1.7m to the shareholders
    Holy sh*t I'm confused. Are you using the same numbers as the example I gave above? i.e. property was purchased for R1 358 000 and sold for R2 450 000?

    How do you get taxable profit of R3,227,272?

    Do you mind retyping everything including the calculations?
    Last edited by Basment Dweller; 07-Oct-14 at 01:18 PM.

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    1. Is this your company? I get the sense that you are confusing yourself with the company.

    2. If the property belongs to the company and is held to generate revenue; then correct this is a capital gain and should be included at a rate of 66.6% to the taxable income which is taxed at a rate of 28%.

    3. If you are the owner of the company and you want your company to sell this property so that you as the owner can have the profit therefrom distributed to you as a dividend,
    you still have to go through number 2 above and declare a dividend of which your company will have to withhold 15% thereof and pay over to SARS.
    You will have to declare this in your own personal declaration to SARS and it will be exempt.

    4. No annual exclusions for companies.
    Last edited by Dave A; 07-Oct-14 at 01:39 PM.

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    Quote Originally Posted by Odwa View Post
    1. Is this your company? I get the sense that you are confusing yourself with the company. Yes my company, was confusing it with a personal asset but now understand

    2. If the property belongs to the company and is held to generate revenue; then correct this is a capital gain and should be included at a rate of 66.6% to the taxable income which is taxed at a rate of 28%. How does this work exactly do I times the gain by 66.66%?

    3. If you are the owner of the company and you want your company to sell this property so that you as the owner can have the profit therefrom distributed to you as a dividend,
    you still have to go through number 2 above and declare a dividend of which your company will have to withhold 15% thereof and pay over to SARS.
    You will have to declare this in your own personal declaration to SARS and it will be exempt. Understood

    4. No annual exclusions for companies. Understood
    Reply above thanks

    Clive do you mind helping me with that calculation in a little more detail?

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    Yes.

    Proceeds less Base Cost = Capital Gain x 66.6% = Taxable capital gain

  12. Thanks given for this post:

    Basment Dweller (07-Oct-14)

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