CGT grace period
26 June 2012
Posted by: SAIT Technical
By Prof Emil Brincker (MoneyWebTax)
Companies can still take advantage.
In the Budget Speech of February 22 2012 it was announced that the capital gains tax (CGT) rates would be increased. In particular, it was indicated that the effective CGT rates would be:
13,3% in the case of individuals
18,6% in the case of companies
26,6% in the case of trusts
Effectively, the inclusion rates are to be increased in the case of individuals to 33,3% and in other cases to 66,6%.
Given the fact that the changes were to come into effect for the disposal of assets from 1 March 2012, a number of agreements were concluded with haste on the basis that they were implemented by 29 February 2012. Effectively, the time of disposal of an asset is defined in paragraph 13 of the Eighth Schedule as:
In the case of an agreement that is subject to a suspensive condition, the date on which the condition is satisfied.
In the case of an agreement that is not subject to a suspensive condition, the date on which the agreement is concluded.
Parties had to ensure that all suspensive conditions were satisfied by 29 February 2012.
Lo and behold, the Rates and Monetary Amounts and Amendment of Revenue Laws Bill that was released on 13 March 2012 refers to the fact that the increase in the rates is to come into operation on 1 March 2012 "and applies in respect of years of assessment commencing on or after that date."
In other words, should the year of assessment of a company end on June 30 2012, it has until such date to enter into transactions at the lower CGT rate. Unfortunately this change in wording does not apply to individuals on the basis that the year of assessment commenced on 1 March 2012. However, companies have now been offered a grace period (and in some instances trusts) on the basis that transactions can still be entered into at the lower CGT rate depending on when the year of assessment ends.
It is a pity that the correct terminology was not used when the change in the tax rates were announced, as it could have saved a lot of anxiety and costs on the part of companies that were in the process of entering into transactions pertaining to the disposal of assets. Those companies that thought that they missed the opportunity can still reconsider this given the change in the wording of the proposed legislation.