Q: If an investor exchanges investment funds within
one collective investment scheme (CIS), will the exchange be regarded as a
disposal for CGT purposes?
A participatory interest in a
collective investment scheme constitutes an asset for the purposes of the
Eighth Schedule (Sch) to the Income Tax Act (ITA). Para 61 of the Eighth Sch to
the ITA determines that the holder of the participatory interest must determine
a capital gain or loss on disposal of such interest (i.e. on switching the
funds to another CIS) even though the CIS made the disposal. In the CIS’s hands
the capital gain or loss is disregarded (para 61(3) Eighth Sch). This excludes
CIS in property which is dealt with in terms of para 67A Eighth Sch of the ITA.
Revenue amounts such as interest accrue to the holder of the interest if the
CIS distributes such funds to the holder within 12 months, otherwise it is
taxed in the CIS.
For a detailed discussion please refer to SARS CGT Guide (issue 4) at
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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