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Taxation of Trusts in South Africa

Di family trusts have to pay tax in South Africa? The answer is: YES. THEY DO! Family Trusts pay tax.

Family Trusts are not subject to Capital Gains Tax on the assets placed in the trust. Nor are they subject to Estate Duty.

  • However, family trusts are subject to up to a 45% income tax on monies generated by assets held in family trusts.
  • Special Trusts set up for financial security of disabled family member, are subject to a sliding tax rate scale between a lowest tax rate of 18% and a highest rate at 45%.

Family trust tax can be taxed in the hands of the the benefactor, beneficiary (or beneficiaries), or the trust itself – depending on the type and structure of the trust, and the circumstances.

However, family trust tax is still spared capital gains tax and estate duty exemptions! Your estate (and your beneficiaries) will pay a lot more tax and duties on your (and their inherited) assets if you simply leave them in a will.

That, along with the many other benefits of leaving assets in a family trust, means that despite the family trust tax, they are still the best legal structure for protecting family wealth and financial security over generations.

Offshore Family Trusts:

Offshore family trusts also don’t offer easy escape from the long arm of the SA taxman they might have been in the past.

Trusts of all types must be registered with SARS, and this also includes offshore trusts – of all types. Assets and income in offshore family trusts will soon be subject to tax to family trust taxation.

As of 2019 legislation, coming into effect in 2020, offshore trusts will subject to the lax laws of the country in which they are registered, and / or South African income tax. Where they are subject to double taxation, credit will be given on taxes owed in SA.

Family Trusts Pay Tax – who pays?

Responsibility for family trust tax compliance and tax payments usually lie with the trust’s trustees. Trustees are accepted ‘representative tax-payers’ for family trusts. In this case, Income from standard family trusts are taxed at a flat of 45%.

However, responsibility for paying income tax can also lie with the benefactor (also called the donor) or the beneficiary (or beneficiaries). You can find out more on family trust tax at SARS.

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Erasmus Pretorius

With over 23 years of unwavering expertise, I am a seasoned Chartered Accountant committed to financial excellence. My journey in the realm of finance has been marked by astute strategic insights, meticulous attention to detail, and an unyielding dedication to precision. Over the years, I’ve navigated the complexities of financial landscapes, providing invaluable counsel to diverse clients. My proficiency extends across auditing, taxation, and financial management, coupled with a profound understanding of regulatory frameworks. As a registered professional, I have consistently upheld the highest standards of integrity and ethics, earning a reputation as a trusted advisor in the dynamic world of finance.