I am still going through the Special Voluntary Disclosure Programme (SVDP) process to legalise offshore investments. What will the Sars base time/rate be for future capital gains brought back to South Africa after February 29, 2016? More specifically with cash or unit trusts held in the UK?
The Act contains a provision whereby the base cost of the unauthorised foreign assets for which an application is lodged under the SVDP will be deemed to have been acquired on February 28, 2015 at a cost equal to the highest market value of that asset, in foreign currency, as determined under Section 16. This section refers to the manner in which the amount to be included in the applicant’s taxable income in 2015 is to be determined.
This is based on the market value of the unauthorised foreign assets in the relevant foreign currency and translated into South African rands at the spot rate on the last business day in SA at the end of each year of assessment in question – namely,February 28 2011, February 29 2012, February 28 2013, February 28 2014 and February 28 2015. This is a concession to taxpayers in that the base cost of the foreign assets is effectively increased when determining the capital gain that will be liable to tax when the foreign assets are ultimately disposed of. Instead of relying on the historic cost of the foreign assets, taxpayers will be entitled to rely on the market value used to determine the tax payable on those foreign assets under Section 16 of the Act.
If the proceeds received on the sale of the foreign assets is less than the adjusted base cost, the cost will be limited to the proceeds received. Thus, no capital loss will be allowed to be carried forward to a future year in such cases.
The above would apply to any assets subject to capital gains tax declared and approved under the SVDP application, including the UK. It may be important to note that currency is excluded from capital gains tax.
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