Tax on sale of shares in South Africa
In South Africa, Capital Gains Tax (CGT) is payable on any financial capital gains – irrespective of what constitutes the financial assets. This includes shares.
This is why unit trust and other share-based investment plans must take Capital Gains Tax into consideration. It’s not just applicable to company member shareholders selling to other company member shareholders and other similar sale of shares transactions.
CGT for Buyer of the Shares:
Capital gains tax is only applicable to the seller of the shares, not the buyer. The buyer will only become liable on disposal of their shares.
CGT for the Seller of the Shares:
Capital Gains Tax is applicable to the seller of the shares on transfer of ownership of those shares: – whether it’s
- Sale of shares to a new director, member or investor, or
- Transfer of shares in terms of a buy sell agreement
- Transfer of shares through a Will
- Divorce – though only in cases where the marriage was made in Community of Property
However, the sale of shares is not always between two individuals. Capital Gains Tax also comes into play when shares are ‘sold’ through fund management:
- Withdrawal of funds from an investment fund – both once off and regular.
- Selling off of shares in a unit trust fund to purchase shares in another (or ‘switching’ between unit trust funds)
Capital Gains Exemptions and Tax Rates on Shares:
- Individuals and Special Trusts are exempt from paying Capital Gains Tax on sales of shares below R40 000 per year. This R40 000 will also not be taxed when the amount goes above R40 000. So if you sell R60 000 worth of shares in one financial year, you’ll only be taxed on R20 000.
- Capital Gains Tax exemptions apply in cases of the sale of Offshore Shares if the capital gain has already been taxed in the country where the shares were held.
- As additions to gross income, Capital Gains are taxed at the tax-payer’s nominal rate.
For more detailed information, SARS provides a comprehensive guideline document on the tax applicable to sale of shares and share owners in South Africa. SARS Capital Gains Tax
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