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The interface between capital gains tax and estate duty and the double tax implications thereof.

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This study, called, “The Interface between Capital Gains Tax (CGT) and Estate Duty and the Double Tax Implications thereof” examined the interface between CGT and Estate Duty in South Africa, the double tax implications thereof, and whether these were mitigated by legislation in any manner, and, where it had not been addressed by legislation, to suggest ways in which it could be mitigated. The study emerged from a concern that the current legislation does not function optimally to provide sufficient relief or remedies to a taxpayer affected by double taxation, or where one asset is subject to tax twice. CGT, which is governed by the Eighth Schedule of the Income Tax Act, forms part of Income tax and is levied on all capital losses and capital gains by individuals, trusts and companies unless specifically exempt. Estate Duty is a separate tax governed by the Estate Duty Act and is levied and collected from the estate of every person who dies after the date of enactment. It is submitted that the operation of CGT has a similar purpose to that of the operation of Estate Duty or Donations Tax, and thus there is an avenue for double taxation. The interface between these taxes appears to occur at death of an individual. This is because death constitutes a disposal for CGT purposes, and estate duty is also levied on the deceased estate. The death of a person triggers a deemed disposal for capital gains tax purposes and therefore it impacts the liquidity of the deceased estate, together with the estate duty. Therefore, this dissertation undertakes an exploration of the effect of levying both taxes on death. The following key question is asked: Are there any double tax implications in the interface between CGT and estate duty; and if so, how does legislation mitigate these implications? The following sub-questions emanating from the key question are: How does CGT operate? How does Estate Duty operate? Are there any overlaps in the operation of these two taxes? Are these overlaps in the legislation cause for double tax? Does the legislation mitigate these overlaps? If not, how can these implications be mitigated? Alternate taxation models of the United Kingdom and Australia are examined for their viability for South Africa. It is suggested that the phenomenon of double taxation in South Africa remains a fundamental unfairness to the taxpayer. It is proposed that Estate Duty should be abolished and other possible tax collection alternatives, like increasing the CGT rate, should be adopted, with continued reformation of the CGT system thereafter. While the necessity of greater planning and more time is acknowledged, it is submitted that the challenges South Africa may face in attaining an equitable system in the short term, will be outweighed by the benefits to both the fiscus and taxpayers alike, in the long run.


LL.M. University of KwaZulu-Natal, Durban 2014.


Capital gains tax., Estate planning., Double taxation., Theses--Taxation law.