Capital Gains Tax in South Africa: How It Is Calculated, With Examples

Last Updated: July 2026

Capital gains tax in South Africa is not a separate flat tax. It is calculated by adding a portion of your net capital gain to your taxable income under section 26A of the Income Tax Act, read with the Eighth Schedule. SARS explains that the tax outcome depends on the asset, the base cost, the exclusions available, and your marginal tax rate.

If you want the short version, the calculation usually follows this path: proceeds minus base cost, less exclusions, then apply the inclusion rate, then tax that amount at the normal income tax rate. For individuals, the inclusion rate is 40%, and the annual exclusion is R50,000 for the current year of assessment shown in SARS guidance.

What capital gains tax is

Capital gains tax, often shortened to CGT, applies when you dispose of a capital asset for more than its base cost. A disposal can include a sale, donation, death, emigration, or other deemed disposal events under the tax rules. For South African residents, CGT can apply to assets anywhere in the world, not only assets located in South Africa.

The important point is that CGT is not charged on every profit in the same way as income tax. If SARS treats the profit as revenue in nature, the amount can fall into normal taxable income instead. That is why the nature of the asset and the intention behind holding it matter, especially with shares and property transactions.

How CGT is calculated

The basic calculation has five steps.

1. Work out the proceeds.
2. Subtract the base cost.
3. Apply any exclusions or disregards.
4. Apply the inclusion rate.
5. Include the taxable capital gain in your taxable income and tax it at your normal rate.

In formula form, the standard individual calculation can be shown as:

Capital gain = proceeds − base cost
Net capital gain = capital gain − exclusions
Taxable capital gain = net capital gain × inclusion rate
CGT payable = taxable capital gain × marginal income tax rate

For individuals and special trusts, the inclusion rate is 40%. For companies and most trusts, it is 80%. SARS’s published tax tables show that this produces a maximum effective CGT rate of 18% for individuals, 21.6% for companies, and 36% for other trusts.

Rates and exclusions

The key South African CGT numbers that matter most are the following.

The annual exclusion is applied to the person’s aggregate capital gains and losses for the year of assessment. SARS guidance also notes that unused annual exclusion does not carry forward.

The primary residence exclusion is one of the most important reliefs for individuals. SARS states that the first R3 million of capital gain on the disposal of a qualifying primary residence is disregarded. For a home to qualify, the natural person or spouse must ordinarily reside there as a main residence and use it mainly for domestic purposes.

Base cost: what counts

The base cost is not just the original purchase price. SARS’s CGT guide explains that the base cost can include acquisition costs, transfer-related costs, legal fees, and qualifying capital improvements, but not repairs and maintenance of a routine nature.

For property, the base cost often includes:

• Purchase price.
• Transfer duty.
• Conveyancing and legal fees.
• Bond registration fees, where applicable and allowable in the cost base rules used.
• Capital improvements such as an extension, additional room, or structural upgrade.
• Disposal costs such as agent commission and legal fees on sale.

For shares, the base cost can include the cost of acquisition and certain direct costs related to the purchase. SARS also has special rules for foreign currency share transactions under paragraph 43 of the Eighth Schedule.

Example 1: property sale

Here is a simple capital gains tax example South Africa taxpayers can follow.

Assume you bought an apartment in Johannesburg for R1,200,000. You paid R60,000 in transfer and legal costs, and later spent R140,000 on capital improvements. You sold the apartment for R1,900,000 and paid R90,000 in selling commission and legal fees.

Step 1: Calculate base cost
Purchase price: R1,200,000
Transfer and legal costs: R60,000
Capital improvements: R140,000
Total base cost: R1,400,000

Step 2: Calculate proceeds
Sale price: R1,900,000
Less disposal costs: R90,000
Net proceeds: R1,810,000

Step 3: Calculate capital gain
R1,810,000 − R1,400,000 = R410,000

Step 4: Apply annual exclusion
R410,000 − R50,000 = R360,000

Step 5: Apply inclusion rate
R360,000 × 40% = R144,000

Step 6: Tax at marginal rate
If the person’s marginal rate is 30%, CGT payable on the included amount would be:
R144,000 × 30% = R43,200

That is how capital gains tax in South Africa is calculated in practice: the full profit is not taxed at once, and the tax depends on both the inclusion rate and your personal income tax bracket.

Example 2: shares sale

A common FAQ is: do I pay CGT when I sell shares? The answer depends on whether the shares are capital assets or trading stock. SARS states that if shares are held otherwise than as trading stock, a gain on disposal may be of a capital nature and subject to CGT.

Assume you bought listed shares for R80,000 and later sold them for R150,000. Let us say brokerage and related sale costs were R2,500.

Step 1: Base cost
R80,000

Step 2: Net proceeds
R150,000 − R2,500 = R147,500

Step 3: Capital gain
R147,500 − R80,000 = R67,500

Step 4: Apply annual exclusion
R67,500 − R50,000 = R17,500

Step 5: Apply inclusion rate
R17,500 × 40% = R7,000

If the shareholder is an individual in the 31% marginal tax bracket, the CGT payable would be:
R7,000 × 31% = R2,170

So, a share profit of R67,500 does not become a tax bill of R67,500. Only the taxable capital gain is added to income after exclusions and the inclusion rate are applied.

Primary residence exemption

Another high-intent query is: is my primary residence exempt from CGT? In South Africa, a qualifying primary residence gets a major exclusion. SARS’s guidance says the first R3 million of the capital gain on the disposal of a primary residence is disregarded, and the property must be ordinarily occupied as the person’s main residence mainly for domestic purposes.

That means if your qualifying home produces a gain of R2.4 million, that gain is fully excluded under the primary residence rule. If the gain is R3.8 million, then only the amount above R3 million is brought into the CGT computation.

If part of the property was used for business, the exclusion can be reduced because the home must be used mainly for domestic purposes. SARS says “mainly” means more than 50% for this purpose.

CGT and income tax

A frequent question is: how is CGT different from income tax? The clean way to say it is that CGT is not a separate tax system; it is integrated into income tax through section 26A. A portion of the capital gain is included in taxable income, then taxed at normal income tax rates.

Income tax generally applies to salary, business income, and other ordinary receipts. CGT applies when a capital asset is disposed of at a gain, subject to the rules and exclusions. This is why the same taxpayer can have a salary taxed one way and a share disposal taxed another way in the same tax year.

Special South African rules

SARS has extra rules that matter for real-world calculations.

• Foreign residents are generally taxed in South Africa only on gains from South African immovable property, land-rich companies, or property attributable to a South African permanent establishment.
• South African residents are taxed on worldwide capital gains.
• Securities Transfer Tax is separate from CGT and is charged at 0.25% on the transfer of securities such as listed and unlisted shares. It is not the same tax as CGT.
• For foreign currency share transactions, SARS applies paragraph 43 rules on translating gains and losses.

If you are comparing sale proceeds, it helps to keep these taxes separate. A share transaction may trigger Securities Transfer Tax on transfer, and later CGT when the share is sold at a gain. They are not substitutes for one another.

Worked comparison table

The same gain can produce different tax outcomes depending on the taxpayer type.

This is why the headline “capital gains tax rate in South Africa” can be misleading if it is taken to mean one flat rate. The actual tax outcome depends on the asset, the exclusion, the inclusion rate, and the taxpayer’s income tax profile.

FAQ

What is the capital gains tax rate in South Africa?

There is no single flat CGT rate. For individuals, 40% of the net capital gain is included in taxable income and taxed at the person’s marginal rate, which produces a maximum effective CGT rate of 18%.

Is my primary residence exempt from CGT?

A qualifying primary residence gets a R3 million exclusion on the capital gain. That means many home sales fall outside CGT entirely, provided the residence test and domestic-use test are met.

How is CGT different from income tax?

CGT is included in the income tax system, but it only applies to capital disposals. Income tax applies to ordinary earnings such as salary and business profits, while CGT is calculated through the Eighth Schedule and section 26A.

Do I pay CGT when I sell shares?

You may, if the shares are capital assets rather than trading stock. SARS says gains on shares held as capital assets can fall under CGT, while shares held for trading purposes may be taxed as revenue.

Conclusion

Capital gains tax in South Africa is calculated by starting with the disposal proceeds, deducting base cost, applying exclusions such as the annual exclusion or primary residence exclusion, and then taxing only the included portion at your normal income tax rate. If you understand those four moving parts, the numbers become much easier to verify from your own records.

This article is for educational purposes only and does not constitute professional advice. Consult a qualified professional for your specific situation.