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| in short |

| potential tax break for residences in CC's or PTY's |

 

The Draft Taxation Laws Amendment Bill, 2009, proposes a potential tax break for individuals who have utilised a company or close corporation to hold their residential property.

 

In the past this was an effective way of avoiding transfer duty and protecting one’s home from creditors, however the repercussion of Capital Gains Tax (hereinafter “CGT”), which was imposed in 2001, made it all the less attractive. Basically, the tax man noted this loophole and imposed a CGT by stipulating that the sale of such a residential property would be a capital gain in the hands of the juristic entity, and therefore taxable as such. The Secondary Tax on Companies (hereinafter “STC”) compounded the unpleasant consequence of this form of ownership.

 

A further dampener is that the sale of a corporate-owned residence falls within the realm of the residential property company anti-avoidance rules, introduced in 2002, imposing transfer duty upon a change in the member’s interest in a close corporation or a shareholding in a company that owns residential property.

 

If the new Bill is passed, which may occur at the earliest 1^st January 2010, it will allow for a grace period of two years to transfer such residential properties into the name of a natural person without the unfavourable CGT, STC and transfer duty taxes.

 

It would thus be in those home-owners’ best interests to keep this date in mind.

 

 

 

| contact us |

delport ward & pienaar

attorneys, notaries &  conveyancers
1st floor - cornerstone house

16 loop street

cape town

8001

 

telephone, cape town
+27-21-419.3733

 

telefax, general
+27-21-419.3743

 

telefax, conveyancing
+27-21-425.6782

 

telefax, collections dept
+27-21-421.6625

 

telephone, london
+44-20-8133.0337

 

telephone, washington dc
+1-202-657.6733

 

telephone, hong kong
+852-8139.7374

 

|info@dwp.co.za|

|www.dwp.co.za|

 

 

1st floor - cornerstone house, 16 loop street, cape town | docex 600, cpt | t, +27-21-4193733 | f, +27-21-4193743

info@dwp.co.za | www.dwp.co.za