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Trusts and Estate Planning

You own the shares in a successful company, but now you want to move it into your trust.

Problem! It cost you R100 (the share capital) and now it’s worth, conservatively R4m. That means a Capital Gain of R4m when you sell it to the trust and that’s about R0,7m CGT.

Is there another way?

Yes, there is. It can take a bit of effort, but R0,7m is a lot of CGT, so it’s worth it.

Let’s say your company is called Delta One (Pty) Ltd.

Form a new company called, say, Delta One Services (Pty) Ltd. The director of Delta One will probably have to give permission (to CIPC) to register a company with so similar a name.

Issue all the R120 shares in Delta One Services to your trust owned investment company.

Use all the promotional material of Delta One to promote Delta One Service.

Do all new business in the new company.

Do your best to persuade the Delta One clients to shift to Delta One Services.

Delta One’s turnover will begin to fall and will eventually drop to zero.

It must continue to pay all overheads, such as salaries so that it makes less and less profit, whilst Delta One Services has few expenses and growing turnover.

All the business will have shifted to Delta One Services. And no CGT!

It is probably best to continue this only until Delta One is trading at about break-even. If you carried on, it would be losing money while Delta One Services would be making profits. The loss and the profit can’t be set off against each other, so this would not be tax efficient.

That will leave Delta one with Retained Earnings of R4m and with R4m in the bank (it would have sold all its assets to Delta One Services at some stage).

The R4m would need to be declared as a Dividend and would be subject to Dividends Withholding Tax, so you would get out R3,2m.


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Looking for even more informative content? Check out the books I have written which have proved to be very popular.

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