Primary residence in CC

[Martinco]

I read in a recent article in the Rapport that there is a possibility that SARS is going to give owners of houses vested in a closed corporation the opportunity to register the property in your own name without having to pay transfer fees and capital gains tax. This is provided it is your primary residence and not your holiday home at the coast. According to Rapport this still needs to go before parliament and if approved will give the owner 2 years from beginning next year to end 2011 to do so.

Anybody with more info on this ? And why ? Surely it will deprive SARS of millions in revenue or has it something to do with the phasing out of CCs ?

[Morticia]

It's mostly a cleaning-up exercise - there are thousands of co's and cc's whose only asset is a residential property, i.e. dormant for all intents and purposes.

[Morticia]

see also:

http://www.moneywebtax.co.za/moneywebtax/view/moneywebtax/en/page265?oid=39745&sn=Detail

[Dave A]

there are thousands of co's and cc's whose only asset is a residential property, i.e. dormant for all intents and purposes.

So what's the problem with that?

[Martinco]

So what's the problem with that?

Well Dave, I would think that the number of CCs involved is clogging up their old AT desktop with the 10 Mb hard drive !

I recently looked into selling my house and it would presently take about 250K from the income which quite frankly makes the sale not worth my while. For 250K less I cannot buy what I have.

[Dave A]

OK - so SARS is going to give up a whole chunk of revenue because CIPRO can't cope?
Or is it that SARS is tired of chasing annual returns on all these CC's too?

Just to state the obvious, I don't have a problem with people being saved tax in all this - it's just the dormant CC angle as motive is... interesting.

[Morticia]

There probably is some sort of a hidden agenda - how many of those property owning cc's and co's do you think belong to "people in high places"??

[taxlibrary]

Domestic residence vs primary residence

The draft legislation providing the relief discussed above does not use the term 'primary residence' at all.

It refers to domestic residence, which is only defined as any residence that is used exclusively for domestic purposes.

It also includes a definition for the companies* that the exemption will apply to.
A ‘domestic residence company’ is any company:
(a) the shares of which are all, from 11 February 2009 until any distribution of a domestic residence by that company directly held by a natural person; and
(b) that holds as its sole asset a domestic residence that is and was throughout that period used as a domestic residence by that natural person;

I therefore do not agree with the "provided it is your primary residence and not your holiday home at the coast" provision quoted above.

As the draft legislation reads at present you can use the exemption for any house that has only been used for domestic purposes, e.g. it has not been rented out or used as a home office.


* includes close corporations

[Martinco]

[QUOTE=taxlibrary;25507]
I therefore do not agree with the "provided it is your primary residence and not your holiday home at the coast" provision quoted above./QUOTE]

Thanks for putting us straight ! It shows you how some piece of information can be turned or miss understood !
But, in the long run even better for the homeowner in this situation. Thinking about it...........the banks and lawyers are going to make some money out of this as well.
Do you have a web page with all the info ?

[taxlibrary]

The bill and explanatory memorandum is here:

http://www.treasury.gov.za/public%20comments/Draft%20taxation%20laws.aspx

[Dave A]

Now I'm really questioning the motive!!

[Martinco]

Now I'm really questioning the motive!!

O come on Dave.............Don't you trust the government ? They are so trustworthy and honest !

Back to the implications: I have read the draft and still have a question. If one takes up the "offer" and re-register in your own name, would the rule presently in place for privately registered property apply 100% to the "converted" property as well ? i.e. Selling price minus cost minus R500K and 5% on the rest as CGT or would the rule as for a CC apply i.e. Selling price minus cost and the rest at 25% CGT tax plus company tax 28% on the profit. ( I might have some percentages incorrect , but it still amounts to a huge sum of money )

Mention in the draft is made of a "rollover" and this makes me wonder.

The reason for me asking is that I am thinking of selling and buying again but would it be worth my while to wait until next year ?

[Sieg]

Residence in CC

There was a "window" of opportunity to transfer a residence owned by a CC or company to the natural persons who were the beneficial owners, a few years ago, but that window was closed long time ago. Maybe this is another such window to be created? When it opens, I'll do a post on this Forum. Till then, the windows are closed and if you transfer your house from a cc / pty to yourself, the transaction will attract transfer duty / VAT and possibly Capital Gains Tax.


Sieg

[Martinco]

Has anybody heard any more news on this thread ?

[taxlibrary]

TRANSFER OF A PRIMARY RESIDENCE FROM A COMPANY OR TRUST

The Taxation Amendment Bill B10 of 1 September 2009 has made far-reaching changes to the draft bill.

The relief has been extended to trusts and the condition that the company should have only one asset has been removed.

For more info see: http://www.taxlibrary.co.za/articles/?p=95