Proposed changes to tax legislation regarding trusts will not take place immediately, National Treasury has said.
At present, the conduit principle operating in trust tax law, allows for income that accrues in a trust to be taxed in the hands of the beneficiary. The proposed amendments aim to eradicate income splitting opportunities afforded through this principle, but should have no effect on special trusts.
Those present at a National Treasury briefing on trust tax law held in May 2013, were surprised at the lack of understanding of the operation of trusts and the apparent lack of consideration given to the serious consequences of imposing certain of National Treasury’s proposals.
On 28 June 2013, the South African Institute of Tax Practitioners published a technical note confirming that National Treasury has not yet finalised any tax changes to the tax trust regime and that any amendments would first be discussed and issued for comment. Accordingly, a discussion document will be published for comment before any major legislative amendments are made. The Draft Taxation Laws Amendment Bill, 2013 was released for comment on 4 July 2013 and we confirm, in accordance with the technical note, that no amendments to trust tax law have been made.
Currently, it appears that Treasury’s lack of understanding regarding the role of local trusts and offshore foundations has resulted in a more considered approach to the proposed legislative amendments and demonstrates great uncertainty regarding the future of this trust tax regime. Those waiting with baited breath for clarity regarding the taxation of trusts will have to wait a little bit longer.