South Africans Urged To Complete Capital Gains Tax Valuations

by Robert Lee, Tax-News.com, London

20 August 2004

The South African Revenue Service (SARS) warned taxpayers on Tuesday to complete valuations of assets for capital gains tax purposes before September 30, as a further extension to the deadline is unlikely to be forthcoming this year.

Failure by taxpayers to meet this deadline will result in their being unable to use market value as a means to work out the amount of capital gains tax owed when assets are disposed in the future, which could lead to a higher tax bill, experts warn.

This means that SARS will either use the 80/20 principle - where one is taxed on 80% of the proceeds on the sale of an asset - or the time apportionment ratio, where the whole gain is apportioned to periods before and after October 1, 2001

“If you do not have your assets valued you will have less flexibility when it comes to choosing the method that would be the most effective in your particular circumstance," Allister Long, MD of South Africa's only buyer's agent, Powerhouse, told Business Day.

He added that capital gains tax valuations for assets of more than R10 million or intangible assets of more than R1 million must be submitted with the first tax return by September 30. All other valuations should be submitted on disposal of the asset.

Following widespread confusion over the introduction of these rules, SARS pushed back the original September 30 2003 deadline by one year. However, a tax department spokesman has confirmed that there will be no more extensions to the deadline.

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