However many real estate sellers have been reluctant to pay it. They
believe that it is punitive. That it is a burden on top of several
other burdens which they pay like Agent's commission, survey fees,
endowment fees, mortgage balance, value added tax and other costs.
The tax authority has a new approach in calculating CGT. Previously,
CGT calculation would allow for inflation and cost of
additions/alterations/improvements that the seller would have made to
the property such that CGT would naturally be lower than 20 per cent.
However, this will be now different especially for sellers whose
payments were made in zimdollars because no allowance for inflation and
cost on additions/alterations/improvements is taken into account. CGT
is therefore now calculated at the full rate of 20 pe rcent of the
selling price and not on the gain. However, sellers whose properties
were purchased in forex will still have the privilege of the allowances.
It is however interesting to note that with the current slump on the
property market, those properties whose payments where made in forex
will have instances where CGT will be nil (zero) because there won't be
any gain. For example since the beginning of the year, property prices
have dropped by at least 30 – 50 per cent and there is no capital gain
in that case.
Another issue is that the tax authority is charging a penalty for late
submission of CGT certificate application. An application is said to be
late if CGT application for sales concluded in 2007 going backwards is
not yet submitted.
It is also apparent that withholding tax will fall away especially on those properties whose payments were made in zimdollars.
In general, sellers will not be amused to pay 20 per cent CGT on the
selling price. This may encourage dishonest behaviour such as
manipulation of the selling price and the agreement date. Perhaps the
tax authority needs to put the forex equivalent on properties whose
payments were made in zimdollars so that at least CGT is based on gain
and not the selling price.
BY DUMISANI MANOKORE
For any comments e-mail: [email protected]Post published in: Mining