• January 29, 2015 at 4:24 pm #347

    A taxpayer has four wives; three of his wives live in the Greater Johannesburg area and the fourth wife lives in Port Elizabeth. The taxpayer will commence a new job in Durban and has to re-locate. Taxpayer has to sell his primary residence in order to live near his new place of employment. It is given that the taxpayer sells his two primary residences in Greater Johannesburg. How many residences would qualify for the primary residences exemption for CGT purposes?


    Only one residence may be a primary residence of any taxpayer for any period during which that person held more than one residence. This means that there could never be an overlapping period when one person owns two residences and uses both as primary residences, except when para 48 applies. The latter provision allows for a two-year overlap under specified circumstances.
    Paragraph 48 deems a natural person to have been ordinarily resident in a residence when that person was absent from it for a continuous period not exceeding two years. This rule applies in four situations. These are as follows:


    Residence vacated and offered for sale

    This applies when land is purchased with the intention of erecting a primary residence. Land on its own is not a primary residence. ‘Residence’ means ‘any structure’. A primary residence cannot exist without a ‘structure’. Therefore, for the duration of the time taken to erect a structure – that is, a home – that period would not qualify as the owner’s ordinary residence. The taxpayer is permitted a two-year `grace’ period in which to complete the erection of a residence to be used as a primary.


    Erection of new primary residence

    – Primary residence rendered accidentally uninhabitable

    Death of person with an interest in a primary residence



    This refers to the two-year period after the death of the person who held an interest in the primary residence. During this period or until the residence is disposed of by the executor of the estate, whichever is the shorter, the deceased is treated as having been ordinarily resident in the residence. None of the aforementioned situation applies to the taxpayer currently under review, and only one residence, at a time, is permitted as primary residence.


    The taxpayer – a transport broker – arranges services such as cargo inspection, undertakes the   preparation of customs documentation and arranges container services for goods which the taxpayer, subsequently, transport to Zimbabwe on behalf of his client – a South African resident company.  A South African transport company is utilized to transport the goods to Zimbabwe. Should the transport broker levy output VAT to the South African company?


    If it can be irrefutably confirmed that the activities of the broker is compatible with the definition of `ancillary transport services’, then the vat Act clearly states that such brokers should not levy an output tax (zero-rate) and Section 11 (2) ( c ) of the VAT Act would apply.
    Section 11 (2) c reads as follows:


    1. c) the services (including any ancillary transport services) comprise the transport of goods from a place in the Republic to another place in the Republic to the extent that those services are supplied by the same supplier as part of the supply of services to which paragraph (a) applies

    The taxpayer has to supply the relevant document in order to qualify for zero-rating. The required documents are as follows:
    – Taxpayer copy of zero-rated invoice,
    – Copy of transport contract and the applicable transport document – confirming the collection and delivery addresses,
    – Proof of delivery address of the goods, and
    – Proof of payment.


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