S.L. 123.27 Art. 8Inflation.

(1) The increase for inflation of the value of immovable property is to be determined by using the index of inflation established in terms of article 13 of the Housing (Decontrol)

Ordinance and applying the following formula:

cost of acquisition/improvements x indexyd indexya – 1 indexya

Where -cost of acquistion/improvements is the cost as computed in accordance with rule 2(1)(a) but excluding any expenses related to the deed or any duty or fees;

indexyd is the index for the year immediately preceding that in which the transfer is made;

indexya is the index for the year immediately preceding that in which the property in question had been acquired or completed, whichever is the later, or, when it relates to improvements, for the year immediately preceding that in which the cost for carrying out the improvements was incurred:

Provided that -

(a) where, in terms of the Act, the cost of acquisition of immovable property that is transferred by a person is to be determined by reference to an acquisition happening before the acquisition of that property by that person, indexya is the index for the year immediately preceding that in which the earlier acquisition took place;

(b) the deduction for inflation shall not exceed -TP – CA- D where -

(i) TP = the transfer price of the property

(ii) CA = the cost of its acquisition, taking into account any reduction in the value of property that may be required in terms of rule 2(4)

(iii) D = the other deductions, excluding the deduction for inflation, allowable in terms of these rules.

(2) Where the increase in inflation is to be calculated in connection with a transfer of a controlling interest in a company in the circumstances mentioned in rule 5(8), or a transfer of an interest in a partnership, the formula referred to in sub-rule (1) shall apply subject to the following provisions:

(a) indexyd is the index for the year immediately preceding that in which the said transfer is made;

(b) the increase is to be calculated by reference to such portion of the cost of the acquisition of the immovable property as corresponds to the portion of the immovable property represented by the shares transferred;

(c) if the property was acquired or completed by the company before the interest or shares were acquired by the transferor, the increase in inflation computed in accordance with the foregoing provisions of this sub-rule shall be reduced by the amount corresponding to the increase in inflation from the date of the acquisition or completion of the property by the company or partnership to the date of the acquisition of the interest or shares by the transferor; and when the interest or shares were acquired in different years the reduction shall be calculated up to each year of acquisition. The cost of acquisition to be taken into account in each such calculation shall be such percentage of the cost of acquisition of the property as corresponds to the portion of the immovable property represented by the interest or shares acquired in each year;

(d) the deduction for inflation computed in accordance with this subrule shall not exceed -MV – CA – R where -MV = the market value, determined in accordance with rule 5, of the portion of the immovable property represented by the interest or shares transferred CA = an equivalent portion of the cost of acquisition or completion of that property R = the amount of the reduction, if any, computed in accordance with paragraph (c).

(3) Where the increase in inflation is to be calculated in connection with a transfer of an immovable property acquired causa mortis after the 24th November 1992 but before the 25th November 2003, and in respect of which an adjustment to the value thereof is made in accordance with the Adjustments to Declared Value of Immovable Property Rules, indexya shall be deemed to be the index for the year 2003.