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Tax on the sale of a business

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(Shutterstock)
(Shutterstock)

A Fin24 user wants to know if there is tax on the proceeds of the sale of a business. He writes:

My question I wanted to ask you is: Are the proceeds of the sale of a business taxable?

The amount is R120 0000 and I am 59 years old.

Tony Davey of Tony Davey & Associates responds:

The sale of a business is a capital gains tax (CGT) as distinct from income tax event as a business is classified as an asset.

Bear in mind that it is not the full sale proceeds which are subject to CGT, but the capital gain element only, being the sale price less the acquisition price or original cost.

Fortunately for you, there is a special concession (paragraph 57 of the 8th schedule to the Income Tax Act) where a capital gain is made on the disposal of small business assets.

Provided that the market value of the assets do not exceed R10m, then the first R1.8m of capital gain is exempt.

Further qualifying criteria is that the owner(s) must have held the business for five years, be substantially involved in such and have attained at least age 55.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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