Here's the deal: You may read the information on the site for free. As and when I have the time I'll add new articles, taking into account any questions which have been asked. For legal reasons, please do not consider anything on this site to be advice - the only free investment advice is to apply your own mind. If you want to request that an article be written, then email me. I have limited time available, and will prioritise the work accordingly, so please be patient. Email me at invest@freeinvestmentadvice.org.
Taxation of share owners in South Africa |
30 April 2012. I'm not a tax expert, and this webpage largely reflects my notes on SARS's 27 March 2012 Tax Guide for Share Owners. I haven't attempted to include the details, may have made mistakes & you shouldn't rely on info on this page for making decisions.
Shares held as trading stock are ones you bought for the main purpose of reselling at a profit. Any gain or loss you make on disposal of a share you held as trading stock will be of a revenue nature, and subject to income tax at your marginal tax rate (varying from 0% to 40%).
The disposal of shares held as capital assets (i.e. as long-term dividend-producing investment), result in their gain or loss being of a capital nature. Disregard the first R20,000 of capital gains & losses (2012: R20,000), and of the balance and any assessed capital loss brought forward 33.3% (66.6% for companies) is included in your taxable income & subject to income tax at your marginal rate.
Under section 9C any gain or loss you make on disposal of a qualifying share which was owned by you for a continuous period of 3 years, is deemed to be of a capital nature & will thus give rise to a capital gain or loss.
Qualifying shares unclude units in unit trusts, shares in listed or unlisted resident companies, shares in non-resident companies listed on the JSE, interests in closed corporations. Qualifying shares do not include participatory interests in property unit trusts, shares in share block companies, shares in non-resident companies not listed on the JSE, hybrid equity instruments (e.g. preference shares redeemable within 3 years) & non-participating preference shares.
The capital or revenue nature of shares held for less than 3 years depends on the intention of the taxpayer at the time he bought & sold his shares. If the shares were bought as a long-term investment to produce dividend income the profit is likely to be of a capital nature, but if the shares were bought for the purpose of resale at a profit, the profit will be of a revenue nature. A taxpayer's intention may be tested against factors like frequency of transactions, method of funding & reasons for selling. A change in intention can result in shares held as a capital asset becoming trading stock (or vice versa) - note that changes in intention are irrelevant once section 9C applies.
Base cost of a share includes:
cost of acquisition
securities transfer tax
cost of any option exercised in acquiring or selling the shares
in the case of a listed share or participatory interest in a portfolio of a collective investment scheme, one-third of the interest on any loan used to buy the share or participatory interest.
Fees paid to a portfolio manager to manage your share portfolio do not qualify as part of the base cost of a share.
Due to regulations, our emails and this entire website should be considered as having been set up for entertainment purposes alone. Expect errors and omissions. Investment in shares and other financial instruments should be conducted by professional investment experts only. Any use of the information on my websites, emails and newsletters is at your own risk, and by using it you agree that the owners of our websites, authors and associated parties wont be held liable for any losses suffered as a result of using the information. None of the information should be construed as being advice. Our newsletters, articles, discussions and website are not an offering for any investment. It represents only our and others' opinions. Any views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest. Illustrations, forecasts or hypothetical data are not guaranteed and are provided for illustrative purposes only. There are risks involved in buying or selling a financial product. Past performance is not indicative of future performance. Any investment values given are not guaranteed. Investment returns can be volatile. When investing there is always the risk of losing all or a substantial amount of your investment, as well as the risk of illiquidity. There may be advertisements on some pages on this website, and we may earn income from these advertisements. We may earn commission on products invested in or annuities purchased. We cannot attest to the accuracy of the material presented here, and opinions expressed may be changed without prior notice. In any event our liability will be limited to R1, and any court cases must take place in Cape Town. You may contact us at invest@freeinvestmentadvice.org