by Fanus Jonck

I received the following query: As a non-resident, am I liable for tax on capital gains when selling South African shares?

Answer:

Capital gains tax (CGT) on the disposal or deemed disposal of property in South Africa by non-residents only applies to the disposal or deemed disposal of an asset on or after 1 October 2001. Non-residents are liable to pay CGT on the taxable capital gains made on the disposal of the following assets:

• Immovable property situated in South Africa (for example land and buildings);
• Any right or interest in immovable property in South Africa (for example a long-term lease);
• Shares in a company where 80% or more of the market value of its net assets comprises immovable property in South Africa, and where the non-resident directly or indirectly holds 20% or more of the shares in this company; and/or
• Assets of a permanent establishment (for example, a branch of a foreign company) situated in South Africa.

Non-resident who sell shares on the JSE will not be taxed on the gains in South Africa. The next question is then: Are you a non-resident for tax purposes? You are if you have formally emigrated or if it is clear that you are not returning, i.e. not working abroad for a month and returning to South Africa for a month. Persons who work abroad permanently and have been in South Africa for less than half of the time for the previous five years and each year less than 91 days in South Africa will be deemed as non-residents for tax purposes.

Suppose that such a person bought Sasol shares in 2005 at R100 per share and left South Africa in 2010 when Sasol shares were worth R220 each. He now wants to sell it in 2017 at R400 each. Technically, he should have declared his capital gains in the tax year that he started to be a non-resident for tax purposes. His deemed gain will therefore be R120 (R220 minus R100). Any growth since qualifying as a non-resident for tax purposes (i.e. until he sells the shares at R400) is then not taxable in South Africa.

You are welcome to contact the tax consultant Fanus Jonck with your tax queries: tax@jonck.net.