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It is a general rule in tax that transactions between connected persons are deemed to be at market value.

Typically, this arises when someone sells their fixed property or shares in a private company to their trust.

The question then arises “Who must do the valuation?” and the Income Tax Act and Transfer Duties Act are silent in that regard.

They simply say that SARS may challenge any valuation.

This means that the seller can determine the market value.

And that raises the question “On what basis must the asset be valued?”

Generally, companies are valued on their last signed Annual Financial Statements. If there are no such financials, then one would use the last year’s management accounts (Income Statement and Balance Sheet).

My view with fixed property is that you can use any reasonable method. For example Cost plus whatever happened to the property market between purchase and sale. Covid gives an opportunity to talk that one down.

In all of my 36 years with Harbour and Associates, I have never known SARS to challenge a valuation. I think that’s partly because I tell clients not to be stupidly low with their valuation. Ensure that it looks reasonable and you’ve got an excellent chance that it will pass unchallenged.


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