We have a client who is a South African citizen that had been in Dubai on a work contract for 3 years.
While he was away, he rented out his home in South Africa. Upon his return, he occupied the property for 6 months, thereafter he sold the property, as he planned to return to Dubai. Will he be liable for capital gains tax (CGT)?
The answer; “YES”!
He needed to have been living in the property for at least one year prior and one year after the period of absence for it to be considered a primary residence for capital gains purposes. The first R2 million profit on the sale of a primary residence is not subject to CGT. Unfortunately, he only lived in the property for 6 months upon his return from Dubai.
What Triggers CGT on a Primary Residence?
- If the property remains unoccupied by the owner for a period longer than 5 years.
- During a period of absence, the owner lives within a 250km radius of the property.
- The homeowner used the primary residence tax benefit on another property.
- The homeowner did not live in the property for at least one year prior and one year after a period of absence.
It is important that you plan your relocation considering the capital gains tax implication, failing which, you will have to answer to the Receiver of Revenue and probably end up 6 digits out of pocket.
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