How does capital gains tax work in South Africa?

# How Capital Gains Tax Works in South Africa Capital gains tax (CGT) in South Africa applies when you sell an asset for more than you paid for it. **The maximum effective tax rate is 18% for individuals**, 22.4% for companies, and 36% for trusts. ## How CGT is Calculated CGT uses an **inclusion rate system**: - **Individuals**: Only 40% of your capital gain is taxable - **Companies**: 80% of capital gains are taxable - **Trusts**: 80% of capital gains are taxable The taxable portion is then added to your normal income and taxed at your marginal tax rate. ### Calculation Steps 1. **Calculate your capital gain** (selling price minus base cost) 2. **Apply the annual exclusion** - R40,000 for individuals (increasing to R50,000 from 2027 tax year) 3. **Apply the inclusion rate** - multiply remaining gain by 40% (individuals) 4. **Add to taxable income** and tax at your marginal rate ## Key Exemptions and Exclusions ### Primary Residence Exemption Your primary residence is exempt from CGT up to **R3 million** (effective 1 March 2026, increased from R2 million). This applies to the home you primarily live in. ### Annual Exclusion The first **R40,000** of net capital gains per tax year is completely tax-free for individuals. This exclusion applies across all your capital gains combined. ### Other Exemptions - Personal-use assets under R10,000 - Most personal possessions (excluding collectibles and vehicles) - Retirement fund contributions and withdrawals - Compensation for personal injury ## When CGT Applies CGT is triggered when you **dispose of an asset**, including: - Selling property or shares - Gifting assets (deemed disposal at market value) - Death (deemed disposal to beneficiaries) - Emigration (deemed disposal of worldwide assets) ## Practical Example If you sell shares for a R100,000 gain: - Less annual exclusion: R100,000 - R40,000 = R60,000 - Apply inclusion rate: R60,000 × 40% = R24,000 - Add R24,000 to your taxable income - Tax at your marginal rate (e.g., 26% = R6,240 CGT) ## Compliance Requirements You must declare capital gains on your **ITR12 income tax return**. SARS requires supporting documentation including purchase and sale agreements, improvement costs, and valuation certificates where applicable. For accounting practices managing multiple clients with CGT obligations, **WeekdayApp automates SARS deadline tracking and compliance reminders**, ensuring no capital gains declarations are missed during tax season. ## Important Dates - **Tax year**: 1 March to 28/29 February - **Filing deadline**: Typically 31 October for individuals - **Payment deadline**: Upon assessment or filing deadline if tax owing