Section 12, The Finance Act, 2013

Sections 57 to 61 of the Income Tax Act, 2000 are repealedand replaced by the following new sections- “CAPITAL GAINS TAX REGIME 57 (1). Capital gains tax shall be payable by a chargeable person at the rate of 30% of the capital gain accruing to or derived by that chargeable person from the disposal of a chargeable asset owned by a chargeable person. (2) For the purpose of sections 57 to 61– (i) “capital gain” means the excess of the consideration received or receivable by a chargeable person (whether in cash, kind or by any other means) from the realization or disposal of a chargeable asset over the cost base at the time of the realization or disposal; (ii) “capital gains tax” means the tax arising from a capital gain; (iii) “chargeable asset” includes land and sea, property attached and integrated equipment, fixtures, improvements including leases, anything growing on the land and all interest in the property including sea which may be right to future ownership, right to occupy as tenant, life estate, the right to explore, develop, extract or produce oil, and other minerals, the right to shares, stocks and other investment opportunities in an entity, business or company, intellectual property rights, reversion of property , if it is not used for its current purpose, an easement across another person’s property and any other privileges relating to the property, business and business asset including goodwill wherever situated; (iv) “chargeable disposal” means the sale, realization or change of hands of a chargeable asset other than those specifically exempt from capital gain; (v) “chargeable person” means a person, individual, corporation and related organizations including permanent establishment, associates, affiliates and joint ventures which have made chargeable disposal of a chargeable asset during a year of assessment. 58 (1) Subject to subsection (2), a person who owns a chargeable asset shall be treated as realizing or disposing of the asset where- (a) the person parts with ownership of the asset including when the asset is– (i) sold, exchanged, surrendered, or distributed by the owner of the asset, or (ii) redeemed, destroyed or lost; Disposal or realization of chargeable asset. of section 57 to 61 of Act 2000. “Imposition of capital gains tax. No. 3 Finance Act 2013 No. 3 Finance Act 201312 13 (b) the person begins to use the asset in such a way that it ceases to be a chargeable asset; or (c) the person is a resident who becomes nonresident but only with respect to chargeable asset. (2) Where an asset is disposed of by way of gift, the disposer shall be treated as having received consideration equal to the market value of the asset at the time of the disposal. 59 (1) The cost base of a chargeable asset owned by a chargeable person at a particular time shall be the sum of the cost- (a) including incidental costs and the cost of construction or production incurred by the person in acquiring ownership of the asset; (b) incurred by that person on alteration and improvement of the asset between the date of its acquisition and the date of its realization, (c) incurred by that person in realizing the asset. (2) For the purposes of subsection (1), where, as a result of a person acquiring ownership of a chargeable asset, that person is treated under the rules of chargeable income as deriving an amount of income as contained in this Act, that person shall be treated as having incurred in acquiring ownership of the asset an additional cost equal to the amount of the income. (3) A person who acquires ownership of a chargeable asset in a non-arm’s length transaction shall be treated as having incurred in acquiring that ownership, a cost equal to the market value of the asset at the date of acquisition approved by the Commissioner- General. (4) Where a person who owns an asset, which is not a chargeable asset, begins to use the asset in such a way that it becomes a chargeable asset, that person shall be treated as having incurred in acquiring ownership of the asset a cost equal to the market value of the asset at the date that person begins to so use the asset. (5) Where a non resident person who owns one or more assets, which are not chargeable assets, becomes a resident and, as a result the asset becomes chargeable assets, that person shall be treated as having incurred in acquiring ownership of each asset, a cost equal to the market value of the asset at the time of becoming resident. (6) Where a capital gain is exempt as a result of paragraph (b), (c), or (d) of subsection (1) of section 61, the person acquiring ownership of the asset shall be treated as having incurred in acquiring that ownership, a cost equal to the cost base of the asset of the former owner at the time of realization. (7) Where a capital gain, or part thereof, is exempt as a result of paragraph (e) or (f) of subsection (1) of section 61, the person acquiring ownership of the replacement asset shall be treated as having incurred in acquiring that ownership a cost equal to the cost base of the asset realized at the time of the realization. (8) Where a part of a chargeable asset owned by a person is realized, the cost base of the asset shall be apportioned between the part of the asset retained and the part realized in accordance with their respective market values at the time of realization but the costs incurred in realizing shall not be so apportioned. 60. (1) The consideration received or receivable by a person from the realization of a chargeable asset owned by that chargeable person shall be equal to the sum of all amounts and consideration in kind received or receivable by that person or an associate or a permanent establishment in respect of the realization. “Consideration received in respect of chargeable disposal. “Cost base of a chargeable asset. (2) Where a person who owns a chargeable asset realizes it by way of transfer to an associate or permanent establishment in a non-arm’s length transaction, that person shall be treated as having received consideration of an amount equal to the market value of the asset at the time of the realization. (3) Where a resident person became a non-resident and as a result, is treated as realizing a chargeable asset in accordance with paragraph (c) of subsection (1) of section 58, that person shall be treated as receiving as consideration from the realization the market value of the asset at that time. (4) Where a chargeable asset and one or more other assets are realized in a single transaction and the consideration received for each asset is not specified, the total consideration received from the realization shall be apportioned among the assets in proportion to their market values at the time of the transaction. 61. (1) The following capital gain shall be exempt from the realization of a chargeable asset– (a) capital gain of a person that is up to and under the minimum chargeable income of Le1, 800,000 per annum or per transaction; (b) capital gain accruing to or derived by a company out of a merger, amalgamation or re-organization of the company where there is continuity of underlying ownership in the asset of at least one quarter. (c) capital gain resulting from a transfer of ownership of the asset by a person to that person’s spouse, children, parent, brother or sister; (d) capital gain resulting from a transfer of ownership of the asset between former spouses as part of a divorce settlement or a genuine separation agreement; 14 1515 (e) capital gain where the amount received on realization is, within one year of realization, used to acquire a chargeable asset of the same nature (referred to as “replacement asset”); and (f) where part only of the amount received or realized is used in the manner referred to in paragraph (e), any part of the capital gain represented by the amount used to acquire the replacement asset is less than the cost base of the asset realized at the time of realization.”