South Africa’s Capital Gains Tax (CGT) is not an independent tax—it's integrated into the annual income tax assessment processed through SARS eFiling. It applies when you dispose of an asset (sale, donation, death, emigration etc.) acquired on or after 1 October 2001, and you make a profit above its base cost.
Who Pays CGT & at What Rates?
- Individuals & special trusts: 40% inclusion rate of the capital gain is taxed at your marginal income tax rate (max effective CGT ≈ 18%)
- Companies: 80% inclusion rate × 28% corporate tax = 21.6–22.4% effective rate
- Other trusts: inclusion rate 80% × 45% income tax rate = 36% effective CGT
Residents are taxed on worldwide assets; non‑residents only on immovable property in SA or permanent establishments
Types of Investments Affected
- Shares & Unit Trusts: Profits from sale are taxable.
- Property Investments: Includes buy-to-let and Airbnbs.
- Crypto Assets: SARS taxes crypto gains as CGT or income depending on usage intent.
- Offshore Investments: Gains taxed in Rand at the time of disposal.
- Retirement Funds: Tax-deferred; generally exempt from CGT during growth and on withdrawal.
Exemptions & Exclusions That Matter
- Annual exclusion: Individuals and special trusts receive a R 40 000 exemption per year (R 300 000 in the year of death)
- Primary residence exemption: Up to R 2 million gain on your main home (split between spouses if co‑owned)
- Personal-use assets: Items like household goods, cars, boats used for personal use are excluded .
- Retirement benefits and certain insurance payouts: Exempt from CGT
- Small‑business exemption: At age 55+, individuals disposing of a small business (≤ R 10 million value) may exclude up to R 1.8 million gain .
How CGT Is Calculated: Step-by-Step
- Identify proceeds (value received on disposal).
- Calculate base cost (original purchase price + improvements + costs: transfer costs, agent's or legal fees; special rules apply for assets pre‑1 Oct 2001)
- Subtract base cost from proceeds = capital gain.
- Deduct annual exclusion where applicable.
- Apply inclusion rate (40%, 80%) to net gain.
- Add to taxable income, then apply your marginal tax rate to that portion.
Formula:
CGT payable = (Gain – exclusions) × inclusion rate × marginal tax rate
Practical Examples
Example 1: Main home with full exemption
- Proceeds: R 3 500 000
- Base cost + improvements: R 1 500 000
- Gain: R 2 000 000 → matches R 2 million exemption → CGT = R 0
Example 2: Rental property
- Proceeds: R 4 000 000
- Base cost & improvements: R 2 900 000 → Gain R 1 100 000
- Deduct annual R 40 000 → net gain R 1 060 000
- Inclusion: 40% → R 424 000 added to taxable income
- If marginal rate = 41% → CGT ≈ R 173 840
Example 3: Mixed-use property (part primary, part rental)
- Owned 8 years: lived 5, rented 3
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Gain split pro‑rata:
- Primary portion (5/8): fully covered by R 2 million exemption → zero CGT.
- Rental portion (3/8) gain R412 500 → subtract R 40 000 = R 372 500 × 40% = R 149 000 added to income; taxed at 39% → CGT ≈ R 58 110
Example 4: Unit Trust Investment
You invest R50,000 in a unit trust in 2021. In 2025, you sell for R80,000.
- Gain = R30,000
- Below R40,000 annual exclusion → No CGT payable, but must be declared.
If the gain was R100,000, after R40k exclusion:
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R60k × 40% = R24,000 added to your taxable income
Note: If you trade frequently or short-term, SARS may consider your profits as income, not capital—meaning higher tax.
Frequently Asked Questions (FAQs)
Q1: When is CGT triggered in South Africa?
- Selling an asset for a profit
- Switching unit trusts (treated as disposal)
- Transferring between platforms
- Tax emigration from South Africa
Q2: Does CGT apply if I emigrate?
A: Yes. If SARS considers you “tax emigrated”, it may treat your assets as disposed of and trigger CGT—even if you didn’t sell them .
Q3: Are non‑residents liable for CGT on South African investments?
A: Non‑residents pay CGT only on South African immovable property (or branch assets), not on shares, trusts or unit trusts. Buyers must withhold 7.5% of purchase price as a safeguard; the excess is refundable after assessment
Q4: What base cost methods exist?
A: For pre‑1 Oct 2001 assets, SARS allows time‑apportioned base cost, market value at valuation date or simplified 20% of proceeds method if cost records are unavailable
Q5: Does CGT apply on first-time home sale?
A: If your gain on your primary residence is ≤ R 2 million, it’s fully exempt. However, you still should declare it—SARS applies the exemption at assessment .
Key Takeaways
- CGT forms part of your income tax, not a separate tax.
- Understand inclusion rates (40% or 80%) and your marginal rate (max ~45% individual).
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Exemptions (R 40 000 annual, R 2 million home, small business exclusion) matter.
- Non-residents mainly taxed only on SA real estate.
- Track your base cost data, especially pre‑2001 assets.
Capital Gains Tax in South Africa has nuanced rules but understanding the triggers, rates, and exclusions can help reduce your tax liability. Always keep clear documentation (purchase price, improvements, sale details). If in doubt, consult a SARS-registered tax practitioner.
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