IMPORTANT DATES

Please take note of the following important dates:

• Income tax season 2022 opening            1 July 2022 – 24 October 2022
• EMP501 bi-annually submission             31 October 2022

We are officially halfway through the financial year and with provisional tax season coming to an end, we can
officially sit back and reflect on the past six months. It has been quite an eventful year with great uncertainty
as to what the year will bring. We look forward to coming six months and strive to make the best of it!

In this newsletter we want to touch a bit on the purchase and sale of business interest, and capital gains and
the tax thereof.

Contact us for more information.

• Call us on 012 807 1714
• Email us at info@fcfin.co.za
• WhatsApp us on 071 071 7206
  or visit our website: www.fcfin.co.za

Kind regards,
The FC CA team

Business interest is defined as “the right or entitlement of a person, through ownership, agreement, relationship or otherwise, alone or together with another person.

Business owners have the need to ensure that there will be a continuation of the business upon the death or disability of a co-owner. They further want security in knowing that the disposal of their business interests will be dealt with in an orderly manner.

There is a solution to the above!

The co-owners of the business enter into a buy-and-sell agreement. Upon the death or disability of one of them, the remaining owners buy the deceased’s business interest at a pre-determined price. The purchase price is funded by life insurance policies affected by the co-owners on each other’s lives.

Let FC Wealth and Investments in collaboration with Momentum, assist you with your business continuity planning and buy and sell agreements. We assist with the contractual part as well as the life cover policies to fund it. Contact us on 012 807 17 14 or fanie@fcfin.co.za

What is capital gains tax?

Capital gains tax (CGT) is not a separate tax but forms part of income tax. A capital gain arises when you dispose of an asset on or after 1 October 2001 for proceeds that exceed its base cost.

The relevant legislation is contained in the Eighth Schedule to the Income Tax Act 58 of 1962.

Capital gains are taxed at a lower effective tax rate than ordinary income. Pre- 1 October 2001 CGT capital gains and losses are not taken into account. Not all assets attract CGT and certain capital gains and losses are disregarded.

A withholding tax applies to non-resident sellers of immovable property (section 35A). The amount withheld by the buyer serves as an advance payment towards the seller’s final income tax liability.

To whom does it apply?

GT applies to individuals, trusts and companies.

A resident, as defined in the Income Tax Act 58 of 1962, is liable for CGT on assets located both in and outside South Africa.

A non-resident is liable to CGT only on immovable property in South Africa or assets of a “permanent establishment” (branch) in South Africa. Certain indirect interests in immovable property such as shares in a property company are deemed to be immovable property.

Some persons such as retirement funds are fully exempt from CGT. Public benefit organisations may be fully or partially exempt.

How is the capital gain/loss calculated:

The general calculation formula is as follows:

Proceeds less Base costs = Capital gain or loss

Where:
1. Proceeds is the amount(s) received when disposing of an asset
2. Base cost is the amount(s) actually incurred in acquiring/creating the asset

How is capital gains included in taxable income and what rate of tax does the taxpayer end up paying (effective rate)?

• Individuals and special trusts – @40% above the annual capital gains exclusion threshold of R40 000
  • a. Thus at an effective rate of 40% x in what income tax bracket the taxpayer falls (0 – 45%)
• Trusts (excluding special trusts) – @80% (No capital gains exclusion)
  • a. Thus at an effective rate of 80% x 45% = 36%
• Companies – @80% (No capital gains exclusion)
  • a. Thus at an effective rate of 80% x 28% = 22.4%

On what do I need to pay capital gains tax?

Capital gains tax must be calculated on any event deemed a “disposal event” as per paragraph 11 of the 8th Schedule of the income tax act.

In short this comprises of any disposal or deemed disposal of assets. Here are the events in paragraph 11 deems as “disposal events” in relation to assets:

a) Sale, donation, expropriation, conversion, grant, cession, exchange or any other alienation or transfer of ownership
b) Sale, donation, expropriation, conversion, grant, cession, exchange or any other alienation or transfer of ownership
c) Scrapping, loss, or destruction
d) Vesting of an interest in an asset of a trust in a beneficiary
e) Distribution of an asset by a company to a holder of shares
f) Granting, renewal, extension or exercise of an option
g) Decrease in value of a person’s interest in a company, trust or partnership as a result of a ‘value shifting arrangement’

What happens if I calculate a capital loss?

A capital loss arises when the proceeds of an asset do not exceed the base cost of the asset. This capital loss can reduce other capital gains calculated during the assessment year. If no other capital gains are calculated for the period, then the capital loss will be carried forward for set off against future period capital gains.

NB: Capital losses can’t be set of against any other income derived from business activities except capital gains.

When you dispose of your house (primary residence) you may qualify for a R2 million exclusion when calculating the capital gain on the sale of your house!

(This is subject to you meeting the definitions and criteria as laid out in the 8th Schedule of the income tax act under “Primary residence exclusion”)

We have a new monthly section where we will be giving a general overview of one of our clients. We see it as a networking segment where we introduce a company to your network. It is a free opportunity for you to inform our readers about your company and what you do. If you are interested send a short profile about your company and what you do as well as your company logo and contact details.

In this month’s issue, we would like to introduce THE PLUMBING LADY

The Plumbing Lady is “not just any plumber” because she is a woman, and a very committed and determined woman taking on plumbing as her career. Ronelle started “The Plumbing Lady” in 2007 and has since provided Pretoria’s residential community with a quality and caring plumbing service.

There are now, after 15 years in the business, three “Plumbing Lady” teams in Pretoria, providing customers with drain cleaning, geyser repair and replacement, water leaking and general plumbing maintenance services. The Plumbing Lady prides itself in paying additional caring attention to detail to customer requests, actually cleaning up after work is done at a property and communicating with honesty.

The Plumbing Lady is qualified, licensed and registered with the Plumbing Industry Registration Board. All plumbing teams have experienced and licensed plumbers. We also have men and women apprentices that are following training programmes, in co-operation with training colleges, to provide young people with opportunities in this industry.

For any plumbing work, call Ronelle on 082 453 8001 or visit www.plumbinglady.co.za