Deemed sales for Capital Gains Tax purposes

In everyday life there are a number of transactions that may be undertaken between or amongst parties and involving sales of various securities or immovable property and these may have Capital Gains Tax implications. Capital Gains Tax is chargeable on gains made from the sale of immovable property or marketable securities.  
In addition to the normal sales of specified assets, there are other sales that are also considered for capital gains.
Simply explained, these transactions may not necessarily entail the direct exchanges of cash, dollar notes or cheques but have an ascertainable monetary value. Such transactions are liable to capital gains in terms of the Capital Gains Tax Act [Chapter 23:01].
The following are examples of deemed sales for Capital Gains Tax Purposes:
l Sale by expropriation: The gross capital amount is the compensation so received.
l Sale in execution of a court order: The gross capital amount is the amount realised from the sale.
l Maturity or redemption of a specified asset: The sale price is the gross capital amount.
l Deed of sale:  The gross capital amount is normally the whole amount accruing as a result of the sale including instalments not yet due and payable in terms of the agreement.
l Other disposals such as donations and inheritance: the gross capital amount is normally the market price of the specified asset.
l Compensation for a destroyed asset: the amount recovered from the insurance fund etc.  is taken as the gross capital amount for Capital Gains Tax purposes.
l Transfer of assets between spouses: Where a specified asset, which is a principal private residence, is transferred between spouses the transferor and the transferee may elect that the sale price be deemed to be equal to the deductions allowable in terms of the Capital Gains Tax Act such that nothing will be taxable in the hands of the transferor. However should the transferee sell the asset to a third party, Capital Gains will be calculated as if he/she owned the property from the time it was first owned by the first transferor.
l Transfer of an asset that an individual uses for the purposes of trade to a company under his/her control: The individual and transferee company may elect to use tax values accepted by the Commissioner. This is regardless of the actual consideration received. No Capital Gains Tax arises on such initial transfer of the specified asset. Full liability will, however, be determined in the hands of the seller  as if the property had at all times been owned by the first transferor if the asset is subsequently sold to any person other than a company under the same control
l Transfer of specified assets between or amongst companies under the same control : The transferor and the transferee companies may elect  to use tax values  adopted for tax purposes regardless of the actual consideration. No Capital Gains Tax arises on such internal transfer of an asset but full liability will be computed in the hands of the transferor or transferee company subsequently selling outside the group.
l Share swops: The market value of the specified asset at the date of the swop is generally considered for Capital Gains Tax purposes. However, the specific conditions and elections explained above may also be taken into account depending on the circumstances of each case.
It should be stated that the above list is not exhaustive and clients are advised to contact Zimra offices should they want assistance on the treatment of specific transactions for Capital Gains Tax purposes.
l Article submitted by the Zimbabwe Revenue Authority. To contact us:
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