The capital gains tax forms part of income tax of individuals trusts, and companies and it arises when an asset (both movable and immovable property) is disposed. The conditions under which a capital gains tax is payable have changed over time and as of 1st of October 2001, capital gains tax is now levied in terms of the Taxation Laws Amendment Act, 5 of 2001 effected by Revenue Laws Amendment Act, 19 of 2001 and Revenue Laws Amendment Act, 60 of 2001. The capital gains tax is at a lower effective tax rate than ordinary income and only applicable on proceeds of an asset that exceed its base costs (South African Revenue Services. 2019). Exemptions are applied to primary residences used for personal use on a permanent basis and the exemption for primary residence is limited to the first R2-million gain.
