Before going into this line of business, however, remember to watch out for both capital gains tax and income tax, because you are taxed according to the intention with which property is bought and sold.
For instance, an individual who buys a home with the intention of residing there permanently has capital intention; whereas the situation would be quite the opposite if it was intended to buy and sell property to make a profit (revenue intention).
Businesses buying and selling property for a profit (the property is acquired and disposed of with a revenue intention) will have to realise the proceeds from the sale and include them in gross income statements.
This will be fully taxable.
The more properties you sell in a year, the harder it will become to convince SARS that the income you earn from the sale of the property/properties is of a capital nature as opposed to of a revenue nature.
If you sell a house that you acquired with the intention of living on the proceeds realised from the sale, this would generally be of a capital nature and subject to capital gains tax.
The computed net capital gain (the sale price of the property less the cost of purchasing the property added to the cost of improvements) is reduced to a fraction of the amount to arrive at the taxable capital gain (depending on the identity of the taxpayer), and then included in taxable income for the year.
Those reductions are:
Also worth considering if you invest in property in the Port Elizabeth CBD is the offer of tax incentives if you make capital improvements on exiting premises or erect new buildings, which you then use for business, within the urban development zone.
Bear in mind that the principles applicable to taxation are complex and specialist advice might sometimes be necessary.
Eastern Province Herald
Publisher: I-Net Bridge
Source: I-Net Bridge
