Capital Gains Tax
What is Capital Gains Tax?
Capital Gains Tax (CGT) is not a separate tax in South Africa - it forms part of your normal income tax. When you dispose of an asset for more than you paid for it, the profit (called a capital gain) is partially included in your taxable income and taxed at your marginal income tax rate.
CGT was introduced in South Africa on 1 October 2001, which is known as the "valuation date." Gains or losses on assets acquired before this date are calculated from that date onwards, not from the original purchase.
CGT applies to capital disposals - selling shares, property, or other assets. If you regularly buy and sell assets as a business (trading activity), SARS may treat the profits as ordinary income instead.
Who pays CGT?
CGT applies to all South African residents on assets worldwide, and to non-residents on South African immovable property and certain assets of a permanent establishment.
- Individuals
- South African tax-resident individuals pay CGT on the disposal of capital assets anywhere in the world.
- Trusts
- Trusts are subject to CGT, usually at a higher inclusion rate than individuals (see below).
- Companies
- Companies include capital gains in taxable income at the corporate inclusion rate of 80%.
- Non-residents
- Non-residents only pay CGT on South African immovable property (land and buildings) and fixed business assets in South Africa.
How is CGT calculated?
Calculating your CGT liability involves a few steps:
- Determine the proceeds from disposing of the asset (what you received).
- Subtract the base cost (what you paid, plus allowable expenses).
- The result is your capital gain or loss.
- Apply any applicable exclusions (e.g. annual exclusion, primary residence exclusion).
- Multiply the net capital gain by the inclusion rate for your taxpayer type.
- Add the included amount to your taxable income - your normal tax rate applies.
Net Capital Gain x Inclusion Rate = Taxable Amount
What is "base cost"?
Base cost is generally what you paid for the asset. You can add qualifying expenditure to increase your base cost, thereby reducing your capital gain:
- Purchase price (or market value on 1 October 2001 for pre-CGT assets)
- Transfer duties, conveyancing fees, and commissions paid
- Capital improvements (for property)
- Brokerage fees and STT on share purchases
Inclusion rates for 2024/2025
Only a portion of your net capital gain is included in taxable income. The inclusion rate depends on who you are:
| Taxpayer type | Inclusion rate | Max effective CGT rate |
|---|---|---|
| Individuals & special trusts | 40% | 18% (at 45% marginal rate) |
| Companies | 80% | 22.4% (at 28% corporate rate) |
| Other trusts | 80% | 36% (at 45% trust rate) |
The proposed increase to the individual inclusion rate was not enacted for the 2024/2025 tax year. The rate remains at 40% for individuals. Always verify with SARS or a tax professional before filing.
Annual exclusion
Every individual receives an annual capital gains exclusion of R40,000. This means the first R40,000 of net capital gains in a tax year is excluded from taxation.
In the year of death, the exclusion is increased to R300,000.
If your capital losses exceed your capital gains in a tax year, you cannot claim a refund - but you can carry the assessed capital loss forward indefinitely to offset future gains.
Primary residence exclusion
When you sell your primary home, a special exclusion applies. The first R2 million of the capital gain on your primary residence is excluded from CGT. This is one of the most significant CGT reliefs for individuals.
Conditions to qualify
- The property must be your primary residence - where you ordinarily live.
- The exclusion applies to the dwelling and land, up to a maximum of 2 hectares.
- If you and your spouse jointly own the property, each qualifies for a R2 million exclusion (R4 million combined).
- If the property was only partly used as a primary residence (e.g. portion used for business), the exclusion is apportioned.
Other exclusions & special rules
Several other assets and situations are exempt from CGT or have special treatment:
Worked example
Here's how CGT works for an individual selling an investment property (not their primary residence):
Sale of investment property - 2024/2025 tax year
The R432,000 is added to all other income. If the person's marginal tax rate is 36%, the CGT payable would be approximately R155,520.
Trusts & companies
Different rules apply depending on the entity type:
Trusts
Trusts are divided into special trusts (which receive the same treatment as individuals, including the 40% inclusion rate and annual exclusion) and other trusts (80% inclusion rate, no annual exclusion). Intra-trust asset transfers and distributions may trigger CGT events.
Companies
Companies include 80% of net capital gains in taxable income, taxed at the standard corporate rate. Companies do not receive an annual exclusion. The effective maximum CGT rate for companies is approximately 22.4%.
Reporting CGT to SARS
You are required to report capital gains and losses on your annual Income Tax Return (ITR12 for individuals). Here's what you need to know:
- Report all disposals - even if no tax is due (e.g. the gain was below the annual exclusion).
- Provide details of each asset sold: proceeds, base cost, exclusions claimed.
- Carry-forward losses must be consistently disclosed each year.
- CGT is paid as part of your normal annual assessment - there is no separate CGT payment.
- Provisional taxpayers who anticipate significant CGT should include it in their provisional tax estimates.
SARS may require supporting documentation for CGT calculations. Keep purchase contracts, conveyancing costs, bank statements, and any improvement invoices for at least 5 years after disposal.
Frequently asked questions
No - when you inherit an asset, no CGT is triggered at that point. However, when you eventually dispose of the inherited asset, CGT will apply. Your base cost is the market value of the asset on the date you inherited it (or the deceased's base cost in some circumstances).
Yes. When you sell units in a unit trust or ETF, any gain is subject to CGT. Dividends received from these investments are treated separately (usually as dividend income subject to dividends tax). Keep track of your purchase price (including reinvested distributions) to accurately calculate your base cost.
When you cease to be a South African tax resident (emigrate), you are deemed to have disposed of your worldwide assets at market value on that date - a "deemed disposal." CGT applies as if you sold all your assets the day before you emigrated, except for SA immovable property and certain SA business assets.
No. Capital losses can only be offset against capital gains - not against your salary, rental income, or other ordinary income. Excess losses carry forward to future tax years indefinitely until fully offset against future capital gains.
Yes. SARS treats cryptocurrency as an asset for CGT purposes. When you dispose of crypto (sell, exchange, or use it to buy goods), any gain is potentially subject to CGT. Whether it's treated as capital or revenue depends on your intention and trading frequency - frequent traders may be assessed on revenue account instead.
For shares of the same class in the same company, South Africa uses the weighted average cost method to determine base cost. You calculate the average cost per share across all your purchases, then use that average as your base cost when you sell.