Property is a popular investment vehicle in South Africa. Where property is held as trading stock (i.e. in the case of property traders), any gain or loss on disposal would be regarded as being of a revenue nature and taxable as such. In this scenario, any expenditure relating to the property dealings may be deducted for tax purposes on the basis that it is incurred in the production of taxable income.
Where property is acquired with the intention to hold it as a long-term investment, it would constitute a capital asset in the hands of the taxpayer and fall within the capital gains tax regime. Any proceeds on disposal would accordingly be subject to capital gains tax in the year in which the asset is disposed of. As mentioned above, the base cost of the asset is essentially the acquisition cost. However, certain additions to the base cost are permitted by the legislation, for example, estate agent’s commission, transfer duty and advertising costs to find a buyer or seller.
Property remains a tax-efficient investment where the investor is prepared to hold such property for a longer period, mainly since the inclusion rate of any capital gain realised is significantly lower than thjavascript:void(0)e marginal income tax rate. (Read More..)
Published courtesy of Blue Chip magazine
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