At its meeting today, Cabinet agreed to a one-year extension of the capital gains tax valuation cut-off date.
Cabinet was informed that Capital Gains Tax (CGT) seeks to tax accumulated growth in value over time with respect to all assets. This requires special asset valuation rules for assets acquired before 1 October 2001 , the effective date of CGT. At issue is the 30 September 2003 deadline for obtaining market valuations so that taxpayers can avail themselves of the market valuation method upon any sale of assets at a later date.
GENERAL PUBLIC RESPONSE
Cabinet noted that there is a steady stream of requests received from the tax-paying public, tax practitioners and valuators all of which argue for an extension of the CGT valuation deadline. In particular, all the requests raised the general lack of qualified professional valuators within South Africa as their principal reason for seeking an extension.
DECISION TO EXTEND CUT-OFF DATE BY ONE YEAR
The current 2-year deadline was imposed for very important policy reasons. First of all, market valuations become increasingly unreliable as they are undertaken further and further from the date at issue. Market forces change considerably even within short periods, and delayed valuations become skewed. Second, the market valuation date has already been extended once - from 6 months to the current 2-year period. Lastly, taxpayers falling outside the market valuation method can still rely on other methods - most notably the time-apportionment method.
However, Cabinet was informed of the shortage of qualified valuators within South Africa . Rather than create selected extensions for certain hardship categories of taxpayers, the National Treasury and the South African Revenue Service have recommended a general extension of the deadline as a strategy of easing the capacity constraints in this area. The CGT valuation deadline will be extended for only another 1-year period, ending 30 September 2004. The Income Tax Act, 1962 mandates the Minister to extend the period for valuation by issuing a notice to this effect in the Gazette (see par. 29(8) of the Eighth Schedule which deals with the capital gains tax).
For further information contact Mr Netshitenzhe on 082 900 0083 or Martin Grote (National Treasury) on 012 315 5706
ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
PRETORIA