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Capital gains tax in South Africa is a crucial consideration for property investors and homeowners looking to sell their real estate.
As of September 2025, South Africa imposes capital gains tax on property sales with rates varying significantly depending on whether you're an individual, company, or trust, and whether you qualify for certain exclusions like the R2 million primary residence exemption.
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Capital gains tax in South Africa ranges from 0% to 36% depending on your taxpayer status and property use.
Individuals benefit from a R2 million primary residence exclusion and lower effective rates, while companies and trusts face higher taxation.
| Taxpayer Type | Inclusion Rate | Maximum Effective CGT Rate | Annual Exclusion |
|---|---|---|---|
| Individuals | 40% | 18% | R40,000 |
| Companies | 80% | 21.6% | None |
| Trusts | 80% | 36% | None |
| Special Trusts | 40% | 18% | R40,000 |
| Non-residents (Individuals) | 40% | 18% | None |
| Non-residents (Companies) | 80% | 21.6% | None |
| Non-residents (Trusts) | 80% | 36% | None |
How much capital gains tax do I pay when I sell a property in South Africa?
The capital gains tax you pay depends on your taxpayer status and ranges from 0% to 36% as of September 2025.
For individuals, you'll pay an effective rate of up to 18% on capital gains above the annual R40,000 exclusion. Companies face a higher effective rate of 21.6%, while trusts pay the highest rate at 36%.
The actual amount depends on your marginal income tax rate for individuals, or the corporate tax rate of 27% for companies. If you qualify for the primary residence exclusion, the first R2 million of gain from your main home is completely exempt from capital gains tax.
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What is the current inclusion rate and effective tax rate for individuals, companies, and trusts?
The inclusion rates determine what percentage of your capital gain gets added to your taxable income.
Individuals and special trusts have a 40% inclusion rate, meaning only 40% of the capital gain is subject to tax at your marginal rate. With the maximum individual tax rate of 45%, this creates an effective capital gains tax rate of 18%.
Companies face an 80% inclusion rate applied to the corporate tax rate of 27%, resulting in an effective rate of 21.6%. Regular trusts also have an 80% inclusion rate but are taxed at up to 45%, creating the highest effective rate of 36%.
These rates apply to the taxable portion of gains after exclusions and exemptions are deducted.
What exemptions or exclusions apply, like the R2 million primary residence exclusion?
Several key exclusions can significantly reduce or eliminate your capital gains tax liability in South Africa.
The primary residence exclusion allows individuals to exclude the first R2 million of capital gain from selling their main home, provided it was your primary residence for the majority of ownership period. This exclusion alone can save up to R360,000 in taxes for individuals.
All individuals and special trusts receive an annual exclusion of R40,000 per tax year for all capital gains combined. Small business owners aged 55 or older may qualify for up to R1.8 million in CGT exemption when disposing of qualifying business assets.
Personal-use items, retirement lump sums, donations to public benefit organizations, and certain inherited assets may also qualify for exclusions under specific circumstances.
How do I calculate the base cost of the property, including renovations, transfer fees, and other costs?
The base cost forms the foundation for calculating your capital gain and includes more than just the original purchase price.
| Cost Component | Included in Base Cost | Documentation Required |
|---|---|---|
| Original purchase price | Yes - full amount | Sale agreement, transfer documents |
| Transfer duty and fees | Yes - all transfer costs | Transfer duty receipt, attorney fees |
| Agent commission (buying) | Yes - if paid by buyer | Commission invoice/receipt |
| Property improvements | Yes - value-adding renovations | Contractor invoices, permits |
| Regular maintenance | No - only improvements | Not applicable |
| Legal fees (purchase) | Yes - directly related costs | Attorney statements |
| Survey and valuation costs | Yes - if for purchase | Professional service invoices |
Keep detailed records of all legitimate costs as SARS may request proof during assessment.
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How do I calculate the proceeds from the sale and subtract the base cost to find the capital gain?
The capital gain calculation follows a straightforward formula once you have your base cost established.
Proceeds from the sale typically equal the selling price, but SARS uses market value at disposal if the actual sale price differs significantly from market value. Subtract any selling costs like agent commission and legal fees from the gross proceeds.
Your capital gain equals the net proceeds minus the base cost. If this results in a negative number, you have a capital loss that can offset other capital gains in the same tax year or be carried forward to future years.
Apply applicable exclusions first (R2 million primary residence exclusion, R40,000 annual exclusion), then multiply the remaining gain by your inclusion rate to determine the taxable amount added to your income.
What happens if the property was rented out, used partly for business, or not always my primary residence?
Mixed-use properties require proportional calculations that can significantly impact your tax liability.
If you rented out part of your home or used it for business, only the portion and time period of personal, primary residence use qualifies for the R2 million exclusion. The business or rental portion is subject to full capital gains tax without exemptions.
SARS calculates this on a pro-rata basis considering both floor area and time. If 30% of your home was rented for 50% of your ownership period, then 15% of the total gain would be subject to CGT without the primary residence exclusion.
Keep detailed records of usage periods and rental income as SARS may audit mixed-use property claims. Converting a rental property to your primary residence before sale can help qualify for partial exemption.
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How is capital gains tax treated if I am a non-resident selling property in South Africa?
Non-residents face the same capital gains tax rates as residents but lose access to certain exclusions and face additional withholding requirements.
Non-resident individuals pay the same 40% inclusion rate and effective rate up to 18%, but cannot claim the R40,000 annual exclusion that residents enjoy. Non-resident companies and trusts follow the same inclusion rates as their resident counterparts.
The primary residence exclusion typically doesn't apply to non-residents unless the property was their main residence before emigrating and they qualify under specific SARS provisions.
Non-residents must also comply with withholding tax requirements, creating an additional layer of complexity in the disposal process.
What is the withholding tax rate for non-residents, and when is it deducted?
South Africa imposes withholding tax on non-residents selling property valued above R2 million to ensure tax collection.
| Seller Type | Withholding Rate | When Applied |
|---|---|---|
| Non-resident individuals | 7.5% | Property value > R2 million |
| Non-resident companies | 10% | Property value > R2 million |
| Non-resident trusts | 15% | Property value > R2 million |
The buyer must withhold this percentage from the purchase price and pay it directly to SARS before property transfer. This serves as an advance payment toward your actual CGT liability, which is determined when you file your tax return.
If your final CGT liability is less than the withholding amount, you can claim a refund from SARS.
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How do I report the capital gain in my annual income tax return (ITR12) with SARS?
Capital gains must be reported in your annual income tax return using SARS' ITR12 form, with specific sections dedicated to CGT calculations.
You'll need to complete the capital gains schedule, providing details about the property disposal including date of sale, proceeds received, base cost calculation, and applicable exclusions. SARS provides online guidance and examples for completing these sections correctly.
Include all supporting documentation with your return submission, as SARS frequently audits capital gains tax calculations. The system will automatically calculate your tax liability based on the information provided.
Submit your return by the annual deadline, typically the end of October for individuals, to avoid penalties and interest charges on unpaid amounts.
What records and supporting documents do I need to keep to prove my base cost and gain calculation?
Maintaining comprehensive records is essential for defending your CGT calculation against SARS scrutiny.
- Original purchase agreement and transfer documents showing the purchase price and date
- Transfer duty receipt and attorney fee statements from the purchase
- Invoices and receipts for all property improvements and renovations (not maintenance)
- Building permits and certificates for major renovations
- Agent commission statements and selling costs documentation
- Property valuations conducted for insurance or loan purposes
- Occupancy records if claiming primary residence status
- Rental income records if the property was partly rented
Store these documents for at least five years after disposal, as SARS can audit returns within this period. Digital copies are acceptable but ensure they're clearly legible.
When is the capital gains tax payable after selling the property, and how do I avoid penalties?
Capital gains tax becomes payable as part of your annual income tax assessment, not immediately upon property sale.
The tax is due when you submit your annual tax return, typically by the end of October following the tax year of disposal. For example, if you sell property in March 2025, the CGT is due with your 2025 tax return in October 2025.
Pay any tax liability by the assessment deadline to avoid penalties and interest charges. SARS charges interest on late payments at the prescribed rate plus additional penalties for non-compliance.
If withholding tax was deducted at sale (for non-residents), this amount credits against your final CGT liability, potentially resulting in a refund if you overpaid.
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Are there legal strategies or structuring options to reduce my capital gains tax liability in South Africa?
Several legitimate strategies can help minimize your capital gains tax burden while remaining compliant with SARS regulations.
Timing your disposal to make use of annual exclusions across multiple tax years, maximizing legitimate improvement costs in your base cost calculation, and ensuring proper documentation of primary residence status are foundational strategies.
Structuring ownership through special trusts for dependents, qualifying for small business exemptions if you're over 55, or timing sales to coincide with lower income years can reduce effective tax rates.
Consider spreading disposals across multiple years to stay within lower tax brackets, or exploring legitimate property exchanges that may defer CGT liability. Always consult with qualified tax professionals before implementing complex strategies.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Understanding capital gains tax is crucial for making informed property investment decisions in South Africa.
With proper planning and documentation, you can legally minimize your tax liability while building wealth through South African real estate.
Sources
- SARS - Capital Gains Tax Rates
- MyDebtHero - Capital Gains Tax South Africa Guide
- FinGlobal - CGT for Residents and Non-Residents
- SARS - Companies and Trusts Tax Rates
- SARS - Primary Residence Exemption
- Just One Lap - Primary Residence Exclusion Guide
- Ooba - Capital Gains Tax South Africa
- KPMG - South Africa Budget Guide 2025