Cap/la! Galm RuWs. 1993

L.:\". to! of 1993

lNCOME TAX ACf

(C AP . 113)

Cap/la! Galm RuWs. 1993

IN exercise orllle powersconfcrrcd by section SA, sectkm 74A Bnd

subsection (I) of section 94 oflllc Income Tax Act , t!ercinafter re ferred

to as ~ the Act tbe Minister of Finance has made the following rules:-

M

•

I. (I) These rules may be ciled as Ihe Ca pital Gains Rules, '1l,1e"'"

1993. (2) The provisions of these rules shall apply 8ll (rom the 25th

Nove mber , 1992 in respect of tile year of assessment 1993 and

subsequent yean of assessment.

In computing tile gains or profits on transfer of immovable

property Ihe following shall be taken into consideration

(8)

tile cost of acquisition which shall include:-

(i) the cost of propeny IrBlISfcned declared in a deed of

purchase and any e~pe nses directly related 10 such deed

mcl uding duly under t he Stamp Duties Ordinance, the DUly

on Doculmn U Act , the Duly on [)QcuIlH:DIS and Transfen

Act , 1993, and age nU' , legal and notan .. l fte$ proved to tbe

t.IItisfaction of the CommillSioner;

(ii)

the value of propert y transferred aIUS<I mortiJ or

inUl~ ~;YOI baied 011 the uSC'ised !lITIO\Int relating to the return

or chargeable property lor the purpose 01 the S • .a:esrioD and

Donation Duties Ordinance, the Death and Dooation Duty

Ad. or 10 the return of a tnmfer C/IUSII mortis for the pIIrpotieS

oftbe Duty on DocumenU aod Transfers Ad , 1993;

«(ii) IIny expendi ture: proved to the satislactlOll of the

Commiuioner to ha~ bttn wboIl y and CJ[cI~yely incurred in

de~lopilli the property beinglTllnsferred;

(iY) death duty paid in re$p«I ofproperty referred toin

lUD.paTllgnlph (ii) of this paTllgTIph. The duty attributable to

tbe propc:ny lnmsfe rred shall be IKCrtllined 11$ fol\ow$:-

(I) ",here the duty re fers 10 property inherited

prior to the IsI January. 1974. by multiplying the duty

paid on tbe estate by tbe proponion ",hieh the amount of

the as.sesse<l yalue of the re:lali~ property bean to tile

assessed Yalue of the ",hole estate.

(2) ",here Ihe duty re:fers to property inherited as

from 1st Jan uary . 1974 . by mul! ipl yi ng the duly paid by a

person in resped of his relatiye portion 01 the estate by

the proporuon .... hich CM ~ value of the relative

property bears to the asscilSed value of the said portion of

the C$tale;

(v) donation dUly paid on the property Intnsferred;

(b) in respect of prope rty acquired after the 31 SI December.

1992. the increase in inflanon resulting from the index of inflation

established in tenn5 of $«lion 13 of tile Housi ng (O«:Qn\rol)

Ordinarla' by taking the year 1992 as a basis year;

improve ments 10 immovable property after acquisition if

(e)

these arc proved to the IoIItisfaaion of the Commi5$ioner ; the

provisions of panlgnph (b) shall.1so apply mN11Uis mulandis with

respect to su~h improve men ts made after 31s\ Decem~ r , 1992;

(d) • maintenance .llowance calculated 110.4% orthe value

of the building. cost price or COSI of completion for every year

between the yea, of .equisition orcomplction and disposal;

(c) other expenses duly receipted and directly rchllcd 10 the

transfer aod not exa:cding five per cenl of the p.1e price .

In determining wh.at expenditure iJ lillowlible there must be

exduded Iny sum wbid! hllS bee n allowed lIS a deduction for tbe

purposes of Part V of the Act or otlterw;:;e lIS I deduction against inrome

under lnyOlher Part of tbe Aa other tbl n xaiou SA of lhe Act .

( I ) The ehargeable gain on transfer of immovable property

acquired before the 151 JanlUlry, 1992 sball be determined as tbat

proportion of the wbole gain whieh the period between 1992 and the

date of transfer bears \0 the whole period of ownenhip on the following

fonnula :-

YD - I992

VT - CA

x

YD - YA

where

vr - value at tilDe of transfe r

C A =CO$t of acquisition of property tranliferred

YD =ycar in which property is transferred

YA -)'car of acquisition of property tr1lJl$ferred being the year of

purchase or the year of comple tion. whichever il tlte later

Provided that where the propertywas transferred between the

period 25th November. 1992 and 31st December. 1992 the chargeable

gain shall be computed on the following formula :-

,

VT - CA

"

x

x

YO -

VA

36S

where

n .. number of days between the 25th November, 1992 and

the date of \I"anSreT.

(2) Where afler the acquisition of the

there ia

lL'iliet

addiliotlal cJpcndlture OD improvements amountin, 10 al least 10% of

the sale price. the chargeable gain Wlj be first allOf'll tcd 10 the original

CO$I: and 10 the lubsequent el<pendi ture and then time apponionmenl

shall be applied to each part separately.

(3) Where the additional cxperWiture is incurred after 1992

the gain anributed 10 this additional expenditu re will nol be subject to

time apponionment as indicated in paragraph (2) of this rule

Provided Ihallhe provision$ of paragnphl (b) and (d) of rule 2

of tbc:se rules shall be disregarded for the pUrposeI of this rule.

(4) NOIwilh$tanding the P=ding proriPon$ uf this rule,

any pcBOl'l may opI by DOIice in writing 10 the Commissioner that

chargeable pins on ' r1Insfc r of immovable propeny acquired before the

hI January, 1992 be wmputcd as laid down in rules 2 and 3 he reof

provided Ih81 -

(i) the innation index referred to in pa ragraph (b) of rule 2

in respect of the ~t of acquisition of the immo~able property shall

slart from the dale the property was acquired; and

(ii) the pro~il;ioru of pilragraph (b) referred to in paragraph

(c) of rule 2 hereof shall apply with respec1 to improv<'menb made

.. h er the date of acquisition oflhc immovable property .

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.5. Where lhe lransfer oomislS of shares pertaining to a oompany TT_

which owns assets in the form of immovable property, the immovable

property shall. at the dale of transfer of shares, be given a market value

ce rtified by an apprailier, architect or olher ~aluer. The market value of

SlK'h property , which shall be taken as lhe cost of acquisitio n, and be

time apportioned to the year 1992 shall be determined u follows:-

Vf-OC

1992- YA

x

YD - YA

where

OC - original OOSI of acquisition of property

\IT _~alu.e of property al time of transfer

YA ·year of acquisition of property bei ng the year of purchase or

th~ year of completion, whiehe\'er is the later

YD - year in which the shares are trandcTTed .

(I) The provisional tax payable in ternuof seetion 74A of the

Act in m;peet of immovable ~ny is 10 be ooIle<1ed from the vendor

and , o r tran sferor by the Notary on pu blication of the relati ve deed of

transfer. This payment is to be DUlde by means of a ban k draft pa)'lLble to

the Commissioner of Inland Reven ue

ProYided thal no provisional tax Shall be collected by the

Notary where the parries declare on the deed that the provisions of

paragraph (b) ohubseetion (5) of lICdion SA ofthe Act apply to the m.

(2) The bank drafls are to be presented with the notice

co ntained in Ihe First Schedule to the Duty on Documents and

Transfers Rules , 1993, and the notice shaU be presented in duplicate.

O ne of the notices sltall be stam ped by the Commissioner in

IId:nowlcdgemcnt of the receipt of the same lI()(ice and of the draft, and

shall be returned 10 Ihe Notary 10 be anne~ed 10 tbe rdatiye deed.

(3) In calculalin, the provisional tu payable by the vendor

and , or transferor . Ihe result ing amount is 10 be rounded down 10 Ih e

nearest Lm . This rounding down may be made in respect of each .-endor

and. o r transfero r if thc:re is more than onc vendor or transferor on the

particular deed of trlLnsfer.

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