Snyman de Jager Gebou/Building, h/v cnr Hendrik Verwoerd & Suid/South Str, Centurion
P.O. Box 8365 Centurion 0046
Tel: (012) 663-1680,  Fax: (012) 663-2030 Docex 9 Centurion, E Mail:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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GOOD NEWS IN 2010

AMNESTY FOR RETRANSFER OF COMPANY / CLOSE CORPORATION / TRUST OWNED HOMES:

 

1.   HISTORIC POSITION

In the past the big advantage of owning a home through a Company, Close Corporation was that on a resale, the share or Members interest in the Company / Close Corporation, could be transferred free from transfer duty and Capital Gains were not taxed.

 

2.  THE POSITION HOWEVER CHANGED IN 2001 WITH THE INTRODUCTION OF CGT

2.1    From 2001 Capital Gains Tax is payable on the gain at the following rates :

Company/Close Corporation	-14%
Trusts	-20%
Natural persons up to	-10%

2.2    There is a full rebate on the first R1500 000.00 gain provided a Natural Person is the owner of the property.  No such rebate is applicable to Legal entities;

2.3     STC is payable on dividends arising from the disposal of property by a Company;

2.4     From 2002 transfer duty is from 2002 payable on the transfer of shares or members interest;

2.5     The annual fee payable by companies will from 2010 increase to R4000 per year.

 

3.   AMNESTY OPPORTUNITIES

During 2001/2002 SARS allowed shareholders to transfer property from a company or Close Corporation without paying Transfer duty or CGT. Now a second opportunity exists to transfer residential property out of Companies CC’s or Trusts without paying Transfer duty or CGT in terms of the Taxation Amendment Laws (Act 17/2009) - Published 30 September 2009

 

4.   REQUIREMENTS

4.1     The Property registered in the Close Corporation Company or Trust must be used exclusively for domestic residence purposes;

4.2     The shares etc must be held by a natural person (and his spouse);

4.3     The Shareholder to live in the house from 11 February 2009 to transfer date;

4.4     The property must be the sole property of the Company;

4.5     The Company / Close Corporation / Trust makes a distribution of the property to the shareholder between 11 February 2009 and 31 December 2011 in anticipation of the winding-up or deregistration of the Company / Close Corporation / Trust

 

5.   CONSEQUENCES

5.1    The Company / Close Corporation / Trust is deemed to have disposed of the property for an amount equal to the Base Cost of the property;

5.2    The CGT is rolled over/deferred: If the shareholder sells the property at a later stage, he qualifies for the primary rebate (R1,5M);

5.1     No change in Estate Duty consequences;

5.2     No Transfer duty or STC payable;

5.3     Existing loan (if any) to be disposed or re-registered;

 

6.    EXCLUSIONS

6.1    If there are more than one shareholder in the company (and not related);

6.2    If Company owns more than one property;

6.3    If the shareholder is a legal person or trust;

6.4    If the shareholder is not living in the house as primary residence.

6.5    If the property's size exceeds 2 hectares;

 

7.    ADVANTAGES

7.1    No Transfer Duty or STC

7.2     HUGE CGT savings (can be more than R300 000)

NB :   Before selling/disposing of your residential property registered in your Company/Close Corporation or Trust consider the CGT implications and the huge savings if you use the amensty provisions to first transfer the property into your own name and then to sell/dispose it.

 

Practical example :

If the family home has been registered in a Company/Close Corporation / Trust and the value has increased, capital gains tax is payable upon its disposal on the gain at a rate of 14% for a Company / Close Corporation and 20% for a Trust; (A natural person gets a primary rebate on the first  R1500 000.00)

Property purchased in 2002 for	R1000 000.00
Sold in 2009 for	R2600 000.00
Nett Gain of	R1600 000.00
CGT in Company / Close Corporation @14%	R  224 000.00
CGT in Trust @ 20%	R  320 000.00

 

If you first transfer the property into your own name in terms of the amnesty the calculation will look as follows :

Nett Gain	R1600 000.00
Less Primary Tax Rebate	R1500 000.00
Taxable Gain	R  100 000.00
CGT Private Person (Max 10%)	R    10 000.00
SAVINGS: The CGT saved if property is in a Trust is	R  310 000.00
The CGT saved if property is in a Company/CC is	R  214 000.00

 

8.   CAUTION

8.1    Companies/trusts may still be a viable vehicle to hold property, but must form part of the bigger estate planning.

8.2    Obtain expert advice.

 

Notes by Corrie de Jager

Snyman de Jager  Attorneys

November 2009

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