Author Topic: TAX (Read 11262 times)

Junz · « **on:** February 12, 2015, 09:08:00 pm »

Hi Guys,

I have invested some money in Allan Gray for roughly 1year - balanced fund,

I saw that today it has increased in value by 30 K, , I want to take out some money and put it in coronation,

will i pay tax on the 30k ?

erwintwr · « **Reply #1 on:** February 12, 2015, 09:36:09 pm »

Quote from: Junz on February 12, 2015, 09:08:00 pm

Hi Guys,

I have invested some money in Allan Gray for roughly 1year - balanced fund,

I saw that today it has increased in value by 30 K, , I want to take out some money and put it in coronation,

will i pay tax on the 30k ?

Most definitely yes. SARS will see it as a trade action and thus a normal profit /income. You will be taxed at your nominal tax rate(same as your PAYE salary).
you can deduct any expenses though - eg other possible trades that returned a Loss

Orca · « **Reply #2 on:** February 12, 2015, 09:47:53 pm »

Yes. If you made a profit of R30K and sell all, you must add the R30K to your other income as SARS sees it as Trading Profit not unlike as if it was profits from a business you run.

Had you held for the 3 year term that section 9C of the ITA states, you would pay no tax as the exclusion is R30K.

If you are going through with this then make sure that you get your base cost correct with the proof of cost as SARS WILL ask for it.

Orca · « **Reply #3 on:** February 12, 2015, 09:49:49 pm »

erwintwr beat me to it while I was typing.

Junz · « **Reply #4 on:** February 12, 2015, 10:09:06 pm »

so how does a tax exemption work, I thought you get 30K exemption ?

or was it 23800 ,

so just to understand this, If i cash out my unit trust I will pay tax on it - so basically no tax exemption ?

Orca · « **Reply #5 on:** February 13, 2015, 06:10:55 pm »

If you read my post above again, you will see that if you hold the UT for 3 years, it will be CGT and not Income. CGT has an exlusion of R30K that you deduct from your total gains in the UT. This does not include the normal deduction from PAYE.

[email protected] · « **Reply #6 on:** February 13, 2015, 07:42:40 pm »

Hi,

Just a correction on the above posts. In simple terms (and based on your facts), there is no need to for you to treat it as a revenue (or trading) gain. You will however need to include it as a capital gain, and can apply the CGT exemption against it.

The detail is however more complex, (and at the risk of boring you), there is essentially two tests under south african tax law to determine whether it is a capital gain (taxed as capital gains) or as a revenue/trading profit (treated as normal income). These tests are

1. What was your intention when you bought the share (or sold the share)? Did you for example indulge in the business of trading, or did you have a more longterm (investing) view? (Case law and precedent is complex in this regard, and i'll return to it later)
2.Any result obtained in 1 above will be overriden if you hold the instrument for longer than 3 years. In which case you are obliged to treat any profit as a capital gain (or loss). I.e. you are essentially deemed to have a long term intention, and any profit is taxed as a capital gain.

In your case, as you've only held the shares for 1 year, point 2 above isn't relevant. And the intention question is key. The traditional tests to confirm intention is things like
- Number of trades
- Frequency of trades
- Length held etc.
- Reasons for sales

In your case, i'm adamant that your intention was capital (i.e. long term), based on the following;
- You only ever purchased one instrument
- You held it for a relatively long period of time (1 year)
- Frequency of trades is minimal.
- The instrument you purchased, unit trusts (even more so a balanced fund), is not traditionally an instrument used by traders. An indicates a long term intention
- You are selling the instrument to re-balance your portfolio (very NB)
- (never admit you are selling to take profit).

From the evidence, i'd say you always had a long term investing intention, and thus you're gains should be taxed as capital gains. My view of the risk of SARS differing in view as being low to non-existent.

Note. Above is based on the info that you have given.

[email protected] · « **Reply #7 on:** February 13, 2015, 07:51:56 pm »

ps. for those that want to read about intention, there is no better place to read up than the SARS comprehensive guide to capital gains (its actually one of SARS's better guides). It can be found here http://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-CGT-G01%20-%20Comprehensive%20Guide%20to%20Capital%20Gains%20Tax%20-%20External%20Guide.pdf

Go to about page 12/13 for the discussion on intention

gcr · « **Reply #8 on:** February 13, 2015, 11:58:45 pm »

Quote from: XXXXX on February 13, 2015, 07:42:40 pm

Hi,

Just a correction on the above posts. In simple terms (and based on your facts), there is no need to for you to treat it as a revenue (or trading) gain. You will however need to include it as a capital gain, and can apply the CGT exemption against it.

The detail is however more complex, (and at the risk of boring you), there is essentially two tests under south african tax law to determine whether it is a capital gain (taxed as capital gains) or as a revenue/trading profit (treated as normal income). These tests are

1. What was your intention when you bought the share (or sold the share)? Did you for example indulge in the business of trading, or did you have a more longterm (investing) view? (Case law and precedent is complex in this regard, and i'll return to it later)

Fully concur with this analysis - its the principles I apply when submitting my tax return
2.Any result obtained in 1 above will be overriden if you hold the instrument for longer than 3 years. In which case you are obliged to treat any profit as a capital gain (or loss). I.e. you are essentially deemed to have a long term intention, and any profit is taxed as a capital gain.

In your case, as you've only held the shares for 1 year, point 2 above isn't relevant. And the intention question is key. The traditional tests to confirm intention is things like
- Number of trades
- Frequency of trades
- Length held etc.
- Reasons for sales

In your case, i'm adamant that your intention was capital (i.e. long term), based on the following;
- You only ever purchased one instrument
- You held it for a relatively long period of time (1 year)
- Frequency of trades is minimal.
- The instrument you purchased, unit trusts (even more so a balanced fund), is not traditionally an instrument used by traders. An indicates a long term intention
- You are selling the instrument to re-balance your portfolio (very NB)
- (never admit you are selling to take profit).

From the evidence, i'd say you always had a long term investing intention, and thus you're gains should be taxed as capital gains. My view of the risk of SARS differing in view as being low to non-existent.

Note. Above is based on the info that you have given.

Orca · « **Reply #9 on:** February 15, 2015, 10:54:33 pm »

Just listen to XXXX. He is our tax expert here. If you can prove Intention then good for you. It can be a shlep but can be done. My post was the normal way using section 9C that SARS cannot or should I say WILL not deny you of accepting your gains as CGT if held for 3 years minimum.

Nios · « **Reply #10 on:** February 16, 2015, 07:58:34 pm »

Check that out
http://bit.ly/1FTmvdC

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Author Topic: TAX (Read 11262 times)

Junz

TAX

erwintwr

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Orca

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Orca

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Junz

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Orca

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[email protected]

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[email protected]

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gcr

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Orca

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Nios

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