Trusts – Distributions from and donations to foreign trusts

On 18 November 2013 the South African Revenue Service (SARS) issued Binding Private Ruling 157 (BPR). The Applicant, a natural person and resident in South Africa, was a beneficiary of two non-resident discretionary trusts A and B. Trusts A and B held various foreign assets such as loan accounts, cash, and shares. Specifically, trusts A and B held all the shares in non-resident companies A and B. It was proposed that trusts A and B would distribute certain of their foreign assets to the Applicant. Upon receipt, the Applicant would donate the assets to a non-resident trust C.

Tax Administration Act – Criminal investigation in relation to a serious tax offence

The Tax Administration Act, No. 28 of 2011 (the TAA) took effect on 1 October 2012. In light of SARS’s strong emphasis on compliance, this article considers the procedures SARS should follow where it believes that a serious tax offence might have been committed. A “serious tax offence” is defined as “a tax offence for which a person may be liable on conviction to imprisonment for a period exceeding two years without the option of a fine or to a fine exceeding the equivalent amount of a fine under the Adjustment of Fines Act, 1991 (Act No. 101 of 1991).”

Capital Gains Tax – Reits, recoupments and assessed losses

Author: Louis van Manen (Grant Thornton) The Taxation Laws Amendment Bill of 2013 (TLAB) contains a proposed amendment to the newly introduced Real Estate Investment Trust (REIT) legislation which should be welcomed by such trusts. While it is generally assumed that the tax burden associated with income and capital gains of REITs is effectively shifted to shareholder level under the REIT legislation, it will not always be the case under the current legislation. Despite enjoying exemption from Capital Gains Tax (CGT) on most immovable

Appointing new beneficiaries of a trust

ITC 1828 70 SATC 91 is not a new tax case. However, it is an interesting case, which highlights some of the potential tax implications that may be triggered upon the appointment of new beneficiaries to a trust, particularly, a discretionary trust. In ITC 1828 70 SATC 91 a discretionary trust (trust) had been established with the object of benefiting the founder, the founder’s wife and the children, being the discretionary income and capital beneficiaries. The trust had acquired certa

The matter of validity: was a trust even created?

Author: Trinette Hartley (Sanlam) Trusts (and more specifically inter vivos discretionary trusts) are known to be useful estate planning tools with numerous benefits. Unfortunately, many trusts are created without a full understanding of what trusts are and how they work. This leads to trusts being created for the wrong reasons, trust deeds being invalid and trustees abusing their power.  As a result, our courts are increasingly clamping down on trusts and one should therefore make sur

Proposed amendments to the taxation of trusts

Author: Doria Cucciolillo (The SAIT) Background According to the 2013/2014-budget review the National Treasury intends to amend current income tax legislation that relates to trusts. At present trusts function as flow-through mechanisms and therefore provide loopholes to avoid taxes. The proposed amendments aim to reduce the available tax saving schemes involving trusts, but will have no effect on so-called special trusts (established to take care of minor children and persons with disabilities). This article investigates the income tax consequences of the proposed changes. 

Trusts – is the conduit principle in peril?

The announcement regarding trusts in the 2013 budget is notable for two reasons: its brevity and its lack of detail. Any comments made in advance of the publication of the first draft of the Taxation Laws Amendment Bill expected in June can therefore only be speculative.

How tax can affect your residential property investment

Returns, pitfalls and tax breaks in a nutshell Tax can make or break the potential returns from an investment in residential property. To benefit from possible tax breaks while avoiding the pitfalls, investors should be aware that different investment vehicles can significantly increase or reduce their tax liability. In this article we focus on the purchase of property for the purpose of earning a return rather than for use as a primary residence.

The Trustees of the Insolvent Estate of Grahame Whitehead v Dumas (323/12) [2013] ZASCA 19

The Supreme Court of Appeal (SCA) heard the matter between The Trustees of the Insolvent Estate of Grahame Whitehead and Dr Leon Dumas on 1 March 2013. The judgment was delivered on 20 March 2013 by Cachalia JA (with Lewis, Ponnan, Theron and Petse JJA concurring).

Reforming the taxation of trusts: a long time coming

By Johan van der Walt High Net Worth Individuals (HNWI’s) and their use of trusts for tax and estate planning purposes go hand in hand. A trust is often praised for its “flexibility”. Open any financial planning periodical and there’s bound to be an article on the virtue of trusts.