Q: Our South
African resident client sold his shares in a UK company and realised a capital
loss thereon. In the same tax year he sold his shares in a South African
company and realised a capital gain. Can the foreign capital loss be offset
from the local capital gain in the calculation of capital gains tax?
‘prohibition’ that you refer to may well be to the fact that a taxable capital
gain may not be set off against a foreign assessed loss or balance of a foreign
assessed loss brought forward from the preceding year of assessment. This
follows from the definition of the term ‘taxable income’ read with paragraph
(b) of the proviso to section 20(1).
The Eighth Schedule, in contrast, contains no restriction on
the set-off of foreign capital losses against domestic capital gains. Nor does
it restrict the set-off of domestic capital losses against foreign capital
gains. Thus, subject to the clogged loss rule in paragraph 39 and the
anti-avoidance provisions of section 103/Part IIA, there is nothing to prevent
the set-off of a foreign capital loss against a local capital gain.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
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