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Effective date for Capital Gains Tax on Property Transaction – SARS

This important reminder comes from Tony de Wijn of Softbyte Computers, author and developers of the famous Wintax software (as used by most tax practitioners and Certified Financial Planners in South Africa)

Basically what he says is that when you sell a property and there is a CGT liability as a result, then, the effective date of the transaction is important.

Tony explains further …..

It is not uncommon for tax practitioners to make a simple error that could lead them to declare a CGT transaction in the wrong tax year and an error like this could cost the taxpayer a huge amount of money in penalties.

If you dispose of a property then one may assume the date of sale {for CGT) would be the day that the Deeds Office transfers the property from your hands in to the hands of the buyer.

SARS says NO!

SARS says that the Deeds Office has nothing to do with the sale/purchase contract and the date on this sale/purchase agreement/contract, that the owner signs to accept the buyer’s offer, or the date that any suspensive conditions are met, is the only legitimate date to be used as the date of sale in the CGT calculation.

If the sales agreement is signed on 1st February 2021 and the agreement includes a suspensive clause which says the sale is on condition that the buyer obtains the necessary finance then this will affect the date of sale.

If the buyer is granted finance on 27″‘ February 2021 then the date of sale, for CGT purposes, is 27th February 2021. If there is an agreement which states that the seller will vacate the property a certain period after payment is received then this date that the seller moves out and the buyer moves in does not change the date of sale for CGT.  The fact that the Deeds Office may only effect official transfer of ownership in April or May 2021 (falling in the2022 tax year) has no effect on the date of sale for CGT.  The date of sale, for CGT purposes, remains 27th February 2021 and this CGT transaction must be included on the 2021 tax return. In this case, if you use a date after 27th February 2021 as the date of sale and only declare this CGT transaction in the 2022 tax year then this will lead to severe penalties and interest.

TAKE CARE AND TAKE NOTE

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