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CPT payment on money held for 3rd party.

Posted 9 September 2015 under Tax Questions



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Robert says:
1 September 2015 at 7:36

I have a parent whom gave me money a couple of years back to place in an investment in my name. Recently the entire investment was cashed out and transferred back to said parent. I now have been issued with and IT3(c) reflecting this. My questions are as follows:

1) Though it is not stated on the IT3(c), do I need to pay CPT on the proceeds (SARS code 4205)?
2) If I need to pay CPT, as this money did not belong to me (though the investment was in my name, I did not derive any benefit from it), is there a way in which the CPT can reflect against the party whom the money belonged to?

Thanks

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TaxTimTaxTim says:
3 September 2015 at 11:03

How much is the total gain showing?


Robert says:
3 September 2015 at 13:25

The gain is around R 260,000.00.

From what I understand there is a R30 000.00 allowance, but that still means I'll have 33.3% of R230 000.00 added to total income.

Understandably, I ideally don't want to be taxed on a gain that I did not derive benefit from, nor have to be in the position where I need to "claim back" the additional tax from said parent (whom is not earning at the moment).


TaxTimTaxTim says:
4 September 2015 at 10:36

Was there any agreement in place between you and your parents showing that they gave you the money to invest on their behalf?


Robert says:
4 September 2015 at 18:07

Only a verbal agreement.


TaxTimTaxTim says:
7 September 2015 at 16:40

You could probably be able to demonstrate to SARS that you were acting as the agent for your parents and the CGT belongs to them.


Robert says:
7 September 2015 at 19:29

Ok Thanks. So as this gain is currently reflected in my name how do I do this?

Do I declare it on my tax return? If I don't... how do I inform SARS on submission of my tax return that this gain, which I'm now not declaring, is not mine and should reflect against someone else?

The last thing I want is for a knock on the door from an unhappy Mr TaxMan wanting his pound of flesh.


TaxTimTaxTim says:
8 September 2015 at 7:22

You would need to get a letter from your parents stating that you were given the money to invest for them and on their behalf, if they ever do ask for evidence of why you did not declare this amount. If you have the trail of cash flow as evidence that would be better as well. Are they going to declare this?


Robert says:
9 September 2015 at 20:36

I'm assuming they would need to declare the gain then.


TaxTimTaxTim says:
9 September 2015 at 22:35

Yes they would, someone will always need to declare this gain to SARS.


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