I have been developing and maintaining various software throughout the past 4-5 years, I earn a income on the sale of 1 year licenses of these software and declare it as part of my normal monthly income and pay normal income tax on this. I have however been approached by a company wanting to buy the software and all the rights to it from me, how will taxation work on this? I am already being taxed to oblivion and beyond on the sales as I declare it as part of my normal income, would hate to have the final transaction also be subjected to the big percentage SARS takes from my income. From what I have read this should fall under Capital Gains Tax? Am I correct in assuming this and how would I go about declaring this sale in my next tax return to not be taxed 41% on that payment?
You are correct, this value would be taxed at CGT rates which means the most that would be included would be 13.65% of the gain between what it cost you develop and what you sold it for. You would need to speak to a valuation expert to get an idea of the cost that you incurred so as to reflect a true base cost when concluding the transaction.
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