Is the sale of inherited agricultural land exempt from CGT?
14 April 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I need to know
if there is any relief on an inheritance of an agricultural property (i.e. land)
in terms of STC and CGT due to the only intention of forming a company was due
3 siblings inherited an agricultural property but were told
that due to the fact that it is land, they need to register a company because
land cannot be owned by more than one individual. As result they formed a
company and sold the property which obviously created CGT as well as STC.
A: You are
referring to the Subdivision of Agricultural Land Act, 1970 (section 3 - no
undivided share in agricultural land not already held by any person, shall vest
in any person). We accept that the heirs
accepted the shares in the company in lieu of their respective interests in the
We are not sure why you refer to STC as that tax was
replaced by the dividends tax with effect 1 April 2012. Our guidance assumes that the transaction
(disposal of the farm) took place after 1 April 2012. If not, we need to know when the farm was
sold to provide the guidance.
We assume that when you say ‘sold the property’ you are
referring to the sale by the company of the property.
With regard to the capital gain in the company we need to
know whether or not the farm was brought into the company by way of loan
account or equity shares. The base cost
of the farm would be the same for the company as it was for the
individuals. We assume the deceased died
after 1 October 2001. As the farm was
held on capital account by the company a capital gain will arise and you are
correct that any distribution of the taxable capital gain after deducting the
normal tax will be a dividend subject to the dividends tax.
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.