Results 1 to 6 of 6

Thread: Capital Gains Tax or Income Tax

  1. #1
    New Member
    Join Date
    May 2017
    Location
    Cape Town
    Posts
    3
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Capital Gains Tax or Income Tax

    Hello

    I would sincerely appreciate help with the question that I have.

    BACKGROUND
    I work as an electronics technician at a company for whom I manufacture electronic modules for internal use.
    I have never being involved in manufacturing electronic modules or the sale of components in my private or professional capacity.

    PROBLEM/QUESTION
    I have bought a lot of new (unused) electronic components (for a good price) from a company that closed down. The purchase was cash and I have no receipt for the purchase.

    One can argue that I bought the components:
    1. For use in my private projects without selling any produced product.
    2. To use in products that I plan to sell.
    3. To sell the components either on an individual basis or as a single lot to some one that wants it.
    To be honest I cannot recall my intention but I bought it mainly because I got it cheaply. I notice that in determining whether something is liable for CGT it seems that original intent is an important factor.

    Now I want to get rid of it. I want to sell the components
    1. Either as a lot to an international component redistributor. Maybe 1 or 2 deals/sales will get rid of 90% of the stock
    2. I can sell the components individually on Gumtree, Ebay, OLX and Bid Or Buy. (I must state again that in my day job I am not a reseller of electronic components)
    3. Or a mix of the 2 above.

    I have read up on CGT and frankly I cannot figure out how I will be taxed on the sales of the electronic components. Will the (proceeds of sales - cost of sales - cost of shipping) be subject to "Capital Gains Tax", "Normal income Tax" or "no Tax at all".

    I consider "no Tax at all" because I read that there are exclusions on items such as cars which one use for personal use. One can argue that I bought the components for personal use.

    Please help me to find out how will I be taxed and what I should do to be taxed the least amount.

    Thank you
    Fred

  2. #2
    Silver Member
    Join Date
    Feb 2016
    Location
    Johannesburg
    Posts
    306
    Thanks
    21
    Thanked 76 Times in 68 Posts
    What is the value?

  3. #3
    New Member
    Join Date
    May 2017
    Location
    Cape Town
    Posts
    3
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Quote Originally Posted by Andromeda View Post
    What is the value?
    It is difficult to say. It depends largely on the demand and supply. Some of the components might not be manufactured anymore. It is difficult as a non-distributor to know what components are hard to come by because they are not manufactured anymore. Some components that are not being manufactured might be in high demand because they are still used in designs that are actively manufactured. Thus demanding high prices.

    If I am able to sell all the component at 60% of their minimum advertised (volume sales) market value it would come in at around R250,000. I would be surprised if I get offered less than R130,000 and I would be pleasantly surprised if I get offered R350,000. I must state that a buyer might buy all the stock in one go and I will try to negotiate favorable pricing as an incentive to do so. But it might end up that I will sell the bulk of the stock to 2 or 3 suppliers.


    As a side
    I also have other items that are not electronic components i.e. they are second hand electronic equipment which I might be able to sell on Ebay or locally on Bid or Buy. I might get up to R50,000 for it if I am lucky. Its 3 different category of items with 1 item in 2 categories and 6 items in the third category. I am willing to hold back on selling this equipment or donate it to someone else to sell if it will improve the tax situation i.e. that I minimize the amount of tax I have to pay on selling the electronic components.

    CORRECTION of original post
    "I have never being involved in manufacturing electronic modules for sale or the sale of components in my private or professional capacity."

  4. #4
    New Member
    Join Date
    May 2017
    Location
    Cape Town
    Posts
    3
    Thanks
    0
    Thanked 0 Times in 0 Posts
    I would be grateful for any help.

  5. #5
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    21,358
    Thanks
    3,095
    Thanked 2,494 Times in 2,098 Posts
    Blog Entries
    12
    Other factors are how many "trades" you make a year and how long you have held the item. Years ago I was fairly confident as to what those lines were, but there have been so many updates to tax legislation, practice notes issued etc. since...

    For example, one of the fairly reliable indicators that it might be a capital gain was that the item had been held for at least one year and there was only one transaction in the financial year. Then to make sure you'd ask for a tax directive.
    No idea if that's any use nowadays.
    The trouble with opportunity is it normally comes dressed up as work.

    Alcocks Electrical Services | Alcocks Pest Control & Entomological Services

  6. #6
    Silver Member
    Join Date
    Feb 2016
    Location
    Johannesburg
    Posts
    306
    Thanks
    21
    Thanked 76 Times in 68 Posts
    Fred, I suspect that SARS will be of the view that the income is ordinary taxable income and not capital gains. At the outset you did not acquire items of a capital nature. There is an element of change in use, but I still don't see any indication that the items are capital in nature.

Similar Threads

  1. [Question] Capital gains on sale of a property?
    By Justine in forum Tax Forum
    Replies: 5
    Last Post: 13-Mar-15, 02:39 PM
  2. Capital gains tax calculation -please help
    By Basment Dweller in forum Accounting Forum
    Replies: 17
    Last Post: 08-Oct-14, 10:12 AM
  3. Transfer of shares & Capital Gains Tax
    By SSS100 in forum Tax Forum
    Replies: 8
    Last Post: 20-Dec-12, 12:41 PM
  4. [Question] Capital Gains Tax and shares in a CC.
    By PieterPan in forum Tax Forum
    Replies: 5
    Last Post: 25-Nov-12, 08:36 AM
  5. [Question] Capital Gains Tax on Certified Numismatics
    By JohnApple in forum Tax Forum
    Replies: 1
    Last Post: 22-Oct-12, 01:53 PM

Tags for this Thread

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •