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CGT Calculation for non resident?

Posted 25 July 2014 under Tax Questions

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I inherited shares in a 3 private companies at a total value of R650,000.00 in 2003.
I intend selling all the shares at a total price of R2,500,000.00.
I would thus make a capital profit of R1,850,000.00
I am a non resident of South Africa and a citizen of and tax resident of Australia.
I pay taxes in South Africa on dividend and interest at a tax rate of 18%.
What would my CGT liability be.

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TaxTimTaxTim says:
26 July 2014 at 16:37

Do you live in Australia currently? What do the companies which you own shares of do? Are they property owing companies?

Dinesh says:
27 July 2014 at 22:28

I live permanently in Australia and do not spend more than an average of 3 weeks every alternate year in South Africa since Jan 2004 purely for personal family reasons.

Each of the three companies own and let out residential and commercial property in the Durban CBD.

I own approximately 9% of shares in each of the three companies.

Please do not hesitate any further information that you may require.

TaxTimTaxTim says:
28 July 2014 at 15:26

Non-residents pay CGT only on assets that are property related. If the companies' assets are greater than 80% invested in property, then you would indeed be subject to CGT. The gain would be included in your return of which 33.3% will be included (less R30000) so in effect just over R600 000 would be added to your income which would then see you paying on average 30% tax.

Dinesh says:
28 July 2014 at 23:42

Thank you very much for your response.

Just one point of clarity:-

"in the case of non-residents, the following assets will be subject to CGT:
1. immovable property, or any right or interest in a property (this includes a direct or indirect interest of at least 20% held alone or together with any connected person in the equity share capital of a company, where at least 80% of the value of the net assets of the company is, at the time of the disposal, attributable to immovable property in SA); and
2. any asset of a permanent establishment through which a trade is carried on in SA;

I hold only 9% of shares in each of the three companies which is far below the 20% shown above.

Will the above apply to my situation.

TaxTimTaxTim says:
29 July 2014 at 10:04

Who are the other shareholders, are they SA residents?

Dinesh says:
29 July 2014 at 23:32

Hi Tim

The majority are South African residents and tax payers (75%). There is one other shareholder who lives in Australia who holds approx 16% and I hold the balance of approx 9%.
I look forward to hearing from you.

TaxTimTaxTim says:
30 July 2014 at 0:14

And none of these other shareholders are relatives of yours in anyway?

Dinesh says:
30 July 2014 at 3:11

They are all related to me. They are my cousins.
Just to let you know I do not participate in the management of the companies in any way.
I am just an ordinary shareholder and am not a director.

TaxTimTaxTim says:
30 July 2014 at 12:43

In the case that the other shareholders are only cousins, you would not be subject to CGT.

Dinesh says:
31 July 2014 at 1:19

Thank you very much for your help. I will be in touch with you as soon as my shares are sold and I need to account to the Receiver of Revenue.

TaxTimTaxTim says:
31 July 2014 at 13:29

Only a pleasure! Glad we could assist!

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