How to work out the taxable capital gain when disposing of share investments
ONE OF the underlying principles of Capital Gains Tax (CGT) is that a capital gain is normally determined as being the difference between the proceeds on sale of an asset, less the so-called ‘base cost’. Calculating the base cost is therefore critical to ensure that your gain is calculated correctly.
If you purchased your shares on or after 1 October 2001, calculating the base cost is fairly straight-forward, starting with the actual purchase price of the shares. In addition, you are entitled to add certain costs, such as the dealing costs both when you purchased the shares, as well as when you sold them.
If you borrowed money for the specific purpose of acquiring the shares, Paragraph 20(1)(g) of the Eighth Schedule allows you to add one-third of the interest paid on the loan to the base cost, subject to certain conditions [see note in box below for a more detailed explanation of the conditions set out by Paragraph 20(1)(g)].
In the case of shares purchased before 1 October 2001, market value as at that date is normally used to determine …