Capital Gains Tax in South Africa: A Simple Guide

Wondering when & how you pay tax on your investment profits? Here’s a simple explainer on capital gains tax (CGT) in South Africa, covering shares, property, crypto, ETFs, TFSAs, and more!

What is Capital Gains Tax (CGT)?

• Capital gains tax is a tax on the profit when you sell (“dispose of”) an asset, like shares, ETFs, property, crypto, or offshore investments.
• You only pay CGT when you actually dispose of the asset, selling, switching, donating, or on death.

Key CGT Terms – Quick Reference

• Annual Exclusion: R40,000 profit per person per tax year is tax-free (R300,000 in the year of death).
• Inclusion Rate: 40% of your remaining gain is added to your taxable income (for individuals).
• Effective Rate: You pay tax at your normal income tax rate on that 40%. The maximum Capital Gains Tax rate is about 18% (if you’re in the highest tax bracket).
• Assets Affected: Shares, ETFs, unit trusts, crypto, investment/rental property, offshore assets.
• No CGT Applies To: Money in retirement funds or a tax-free savings account (TFSA)—these grow tax-free.

What Counts as a CGT “Disposal”?

You trigger Capital Gains Tax when you:

• Sell shares, ETFs, unit trusts, or crypto.
• Switch between unit trusts (this is a “disposal”).
• Donate assets to someone else.
• Emigrate and give up SA tax residency (“exit tax”).
• Pass away (assets are “deemed disposed”, with special rules for spouses).

Not a disposal: Buying more of the same share, withdrawing dividends, or capital growth inside a retirement fund or TFSA.

How is CGT Calculated? (Step-by-Step)

1. Work out proceeds: What you got from selling (in rand, minus selling costs).
2. Work out base cost: What you paid to buy + allowed costs (broker fees, admin fees, etc.).
3. Subtract: Proceeds – Base cost = capital gain (or loss).
4. Add it all up: Combine all your gains and losses for the year.
5. Apply annual exclusion: Subtract R40,000 (profits below this are ignored).
6. Apply the inclusion rate: Only 40% of the rest is counted for tax.
7. That 40% is added to your normal taxable income and taxed at your marginal tax rate with your other income.

Capital Gains Tax Explained: Simple Examples

Example 1: Selling a JSE ETF

• Bought for R100,000 + R1,000 costs = R101,000.
• Sold for R150,000 – R1,000 costs = R149,000.
• Capital gain = R149,000 – R101,000 = R48,000.
• Subtract R40,000 annual exclusion = R8,000 left.
• 40% of R8,000 = R3,200 is taxable.
• If your tax rate is 36%: R3,200 × 36% = R1,152 CGT to pay.

Tip: The first R40,000 gains per year are always tax-free!

Example 2: Offsetting a loss

• Share A gain: R30,000. Share B loss: -R20,000.
• Net gain: R10,000 (less than R40,000 annual exclusion).
• Result: No Capital Gains Tax to pay.
  (Unused losses carry forward; unused exclusions don’t.)

Example 3: Selling Investment Property

• Net gain: R500,000. Minus annual exclusion: R460,000.
• 40% × R460,000 = R184,000 taxable.
• If the tax rate is 41%: R184,000 × 41% = R75,440 CGT.

Note: If it’s your primary residence, the first R2 million gain can be excluded (conditions apply).

Example 4: Offshore Investment (Currency Gained)

• Buy $10,000 ETF at R15/$: R150,000 base cost.
• Sell $12,000 at R19/$: R228,000 proceeds.
• Capital gain: R228,000 – R150,000 = R78,000.
• Less exclusion, less inclusion, apply income tax as above.
• Tip: Weakening rand + USD growth = higher SA gain (and tax!).

Example 5: Gains Inside a TFSA

• Buy and sell inside a TFSA?
• No CGT, no income tax, no worries.
• Just stay within annual and lifetime limits.

Common Capital Gains Tax Questions

• Do unit trust switches trigger CGT?
  Yes, every switch is a taxable disposal.
  
• Are dividends subject to CGT?
  No, but dividends are subject to Dividend Withholding Tax. Reinvested dividends increase your base cost for future CGT.
  
• Frequent trader?
  If you trade with the intent to profit, SARS may treat gains as income (fully taxed, not CGT).
  
• Primary residence vs. investment property?
  Primary home: up to R2m gain excluded (if you qualify). Rentals/investments: full CGT applies.
  
• Can losses reduce my income tax?
  No. Losses only offset future capital gains, not income.
  

Legal Ways To Reduce Capital Gains Tax

• Use your annual exclusion, consider “gain harvesting” (selling gains up to R40,000 each year if it suits you).
• Use tax-free and retirement accounts (TFSA, RA, etc.).
• Time disposals over tax years (spread across February year-end for two exclusions).
• Offset gains with capital losses (but don’t make artificial trades—SARS checks).
• Keep all records and receipts for brokerage/admin fees, as they increase your base cost and reduce tax.

Special Topics: Offshore & Non-residents

• SA residents: Pay CGT on worldwide assets, convert foreign currency to rand at both purchase and sale.
• Ceasing SA tax residency: “Exit tax” (deemed disposal) may trigger CGT. SA property is excluded.
• Non-residents: CGT mainly on SA immovable property and certain property-rich shares (check tax treaties for relief).

Where and How Do I Declare Capital Gains?

• Declare capital gains and losses on your ITR12 tax return each year.
• Provisional taxpayers: Include big gains in your provisional estimates to avoid penalties.
• Keep documents for 5 years (contract notes, statements, foreign exchange confirmations, fee schedules, etc.).

Capital Gains Tax Mistakes to Avoid

• Forgetting to include small fees in your base cost.
• Confusing dividends (income) and capital gains.
• Not converting offshore deals to rand using the correct dates/rates.
• Missing the annual exclusion or not carrying forward capital losses.
• Assuming all property sales get the primary residence exclusion, check if you qualify.

Quick CGT Glossary

• Base cost: What you paid for the asset plus buying/selling-related fees.
• Proceeds: What you got from selling, after selling costs.
• Annual exclusion: R40,000 profit per tax year is ignored for CGT.
• Inclusion rate: The portion of gains added to your taxable income (40% for individuals).

Every Capital Gains Tax case is different. For complex investments or big transactions, speak to a tax practitioner or financial planner for tailored advice.

Book an appointment with Financial Future Planners to talk through timing, paperwork, and tax-smart strategies.

Note: Figures above are for 2024/25 and may change. This is general info, not personalised tax advice.

Related Reading

• Why You Shouldn’t Delay Financial Planning & the Value of Starting Early
• How to Create a Financial Plan That Adapts to Life’s Changes
• The Role of a Financial Planner and Why You Need One

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