The tax that punishes South Africans who make good investment decisions

Michael Treherne, a director at Vestact Asset Management, said that Capital Gains Tax (CGT) penalises people for being good savers and investors.

Treherne shared views on capital gains tax in the daily Vestact newsletter following his decision to sell some of his Nvidia shares.

“I sold a few Nvidia shares last year, and because I have a 6,000% gain on the investment, SARS wants its pound of flesh,” he said.

“We all dislike paying taxes, but the tax I hate the most is capital gains tax (CGT). You are basically being penalised for being a good saver and investor.”

To make things worse, he explained, investors don’t receive an inflation adjustment to their base price.

“In South Africa, where inflation causes prices to double every 7 to 10 years, you get nailed just for keeping up with inflation. In real terms, you are going backwards,” he said.

“The part that really kills me is that we already pay large amounts of tax through PAYE, VAT, and municipal rates.”

“In return, you have to pay for your own education, medical expenses, security, backup batteries and water tanks, and even tar to fill the potholes.”

Treherne said that South Africans who use their after-tax money to invest and it grows shouldn’t be taxed on that money again.

Many others, including Dr Brian Benfield, a retired professor from the Department of Economics at the University of the Witwatersrand, share Treherne’s views.

He said capital gains tax is actively hurting savings and investments by punishing the people who could help to improve South Africa’s shortage of invested capital.

“Capital gains tax is taxing phantom gains, illusions created by inflation and currency depreciation,” he said.

“This is a hidden tax on capital that erodes returns, discourages long-term investment, and undermines the foundational principle of tax fairness.”

He argued that the state is taxing its own failure, as inflation is the consequence of government monetary and fiscal mismanagement.

“CGT taxes the inflationary component of asset price increases as if it were genuine profit,” he said.

“This means investors are being penalised not for earning a real return, but for enduring the erosion of their investment’s value.”

Capital Gains Tax in South Africa explained

The South African Revenue Service (SARS) taxes nominal returns instead of real returns for Capital Gains Tax, which has been described as wealth confiscation.

Capital gains tax was introduced in South Africa in 2001. This tax applies to the disposal of assets and forms part of the normal income tax system.

The tax is triggered upon the disposal or deemed disposal of assets, with various inclusions and exclusions.

In the 2026 tax year, individuals and special trusts can exclude the first R50,000 of capital gain or loss.

The first R3 million of a capital gain or loss on the disposal of a primary residence is also excluded.

The percentage of the gain added to taxable income is pegged at 40% for individuals and 80% for companies.

Despite these exclusions, many people argue that capital gains should be calculated on real returns rather than nominal gains.

Real returns are the gains from an investment when adjusted for inflation. Nominal returns are not adjusted for inflation.

For example, if you invest R10,000 and it grows to R11,000 in one year, your nominal return is 10%.

If your investment earns a 10% nominal return but inflation is 6%, your real return is roughly 4%.

Inflation is a secret tax on people who invest or save, as it erodes the value of money. A core reason people invest is to beat inflation to ensure their wealth grows.