Tax on transfer of assets between spouses
FUNGAI CHIMWAMUROMBE AND SIMBARASHE MUKWEKWEZEKE
During the course of marriage or as a result of divorce spouses and former spouses are likely to transfer assets to one another.
The majority of assets are exempt from capital gains tax because they are not specifically listed, such as immovable property and shares in corporations.
In terms of section 16 of the Capital Gains Tax Act [Chapter 23:01], capital gains tax (CGT) is deferred where any specified asset is transferred between spouses or a principal private residence is transferred to a former spouse in compliance to a court directive.
By deferment what is meant that tax will only be paid when the asset is disposed to a third party.
Spouses will refer to persons married in terms of the Marriages Act and it remains to seen if it will apply to couples in a life partnership in terms of property division made by a court.
It is important the benefit be claimed at the time the person making the election is submitting the CGT return for the assessment of his capital gain otherwise the benefit will be lost.
To benefit from section 16 of the stated act the following requirements must be met ;
- That the ownership of any specified asset is transferred from a person to his or her spouse; or
- That a person is transferring their ownership of a specified asset which is their principal private residence to their former spouse in compliance with an order of a court providing for the maintenance of the former spouse or dividing, apportioning or distributing the assets of the former spouses on or after the dissolution of their marriage.
When the specified asset is subsequently sold to another party, capital gain or assessed capital loss shall be calculated as if the asset is still owned by the first transferring spouse.
It is also important to note section 16 of the Act in relation to former spouses relates to when there is a court order and not as elected or decided by the former spouses in the absence of a court order.
Without, doubt it must be stated that the above deferment can only be granted by Zimra and for to be granted an application for Capital gains clearance must be made with it only which after it will be granted.
In the case of divorced spouses I encourage that this process be done swiftly after the granting of a divorce decree.
The deferment of capital gains tax granted to transfers between spouses is a brilliant opportunity worth pursing in estate planning by married couples.
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Zenas Legal Practice and can be contacted for feedback at fungai@ zenaslegalpractice.com and WhatsApp 0772 997 889.
Simbarashe Mukwekwezeke is a registered legal Practitioner and a Senior Associate at Chimwamurombe legal Practice and can be contacted for feedback at simbarashe@zenaslegalpractice.com. Whatsapp/ call +263 77 344 6854
