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Market value used as the valuation date value of immovable property for CGT purposes

Thursday, 06 November 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: Our client, a company, purchased immovable property in 1999 for R1 million. On 1 October 2001 (the date CGT was introduced) the property was valued at R3.8 million. Unfortunately we have no evidence that this valuation was submitted to SARS by the due date for the CGT valuations. The property was then sold during the 2014 tax year for R3 million. We need to know whether or not we can use the market value of R3.8 million as the valuation date value in calculating the base cost of the asset for CGT purposes. 

A: In terms of paragraph 29(4) of the Eighth Schedule and for the purposes of paragraphs 26(1)(a) and 27(3), a person may only adopt or determine the market value as the valuation date value of that asset if—

(a) in the case where the valuation date is 1 October 2001—

(i) that person has valued that asset on or before 30 September 2004;

(ii) the price of that asset has been published by the Commissioner in terms of this paragraph in the Gazette; or

(iii) that person has acquired that asset from that person’s spouse as contemplated in paragraph 67 and the transferor spouse had adopted or determined a market value in terms of this paragraph, and for this purpose the transferee spouse must be treated as having adopted or determined that same market value.  

It was only in terms of paragraph 29(5) and despite subparagraph (4), where a person has valued an asset and—

(a) the market value of that asset exceeds R10 million;

(b) that asset is an intangible asset (excluding financial instruments) and the market value thereof exceeds R1 million; or

(c) that asset is an unlisted share in a company and the market value of all the shares held by that person in that company exceeds R10 million,

that person may only adopt the market value as the valuation date value of that asset if that person has furnished proof of that valuation to the Commissioner in the form as the Commissioner may prescribe, with the first return submitted by that person after the period contemplated in subparagraph (4) or, if it was not submitted with that return, within such period as the Commissioner may allow if proof is submitted that the valuation was performed within the period prescribed.  

There was therefore no requirement that the valuation had to be submitted to SARS before the year of disposal unless the asset was an intangible.  The taxpayer must be able to prove that the valuation was done as required and the required form was completed.  

We need to point out that the 1 October 2001 adopted value can’t create a capital loss – see paragraph 26(3).  

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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