Capital Gains Tax: Seller Beware!

Capital Gains tax “CGT” is the tax that is imposed when an asset is disposed of and bought by another. The Capital Gain is calculated by deducting the Base Cost of the Property from the Proceeds of that Disposal. If it is within the Threshold, and the Type of Property finds CGT application, the entire amount is taxable with a certain Percentage and such will be payable together with other tax for that year of assessment.

This may seem like a mouthful but with the help of a skilled attorney it can mean the difference between walking out of the sale smiling or disheartened by the long arm of tax.

Another consideration that few remember is the impact of the budget speech for each year. The Minister of Finances declares which Threshold amount will be used for the subsequent year of assessment. This amount is fundamental in calculating Capital Gains for the year. Different Percentages are also declared depending on the type of entity or person that is assessed.

All transactions are included whether it be a sale, donation, or cession of rights of Immovable Property. Exceptions do apply but are few and far between. Special trusts and Natural persons, depending on the amount of the sale and difference, often do not pay CGT when alienating a primary residence.

The necessary training and legal advice should be taken whenever possible to protect oneself from hidden costs and the different specific inclusions and exclusions of CGT. An experienced Attorney is worth his/ her weight in gold in this regard. Knowing which vehicle to use, be it special purposes or not, is fundamental in limiting CGT on all property transactions.