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Trusts and Estate Planning

There’s a lot of misconception about SARS, trusts and taxes. Why? Because trusts are taxed at 45% and their CGT rate is 36%, so the buzz is that SARS is going for trusts. Not so!

Consider this. I have no doubt that practically every politician has a trust. That’s where the dirty money goes. And, of course, it is politically correct to appear to be leaning heavily on these things that only rich people have. But that’s all smoke and mirrors. Do trusts ever actually pay tax? Not where I come from. Here’s why.

  1. A trust should never own anything except shares in companies.
  2. The only income that a trust can therefore earn is dividends and these are taxed at source (Dividends Withholding Tax).
  3. So, because the trust will never be liable for any tax, there is no requirement for it to register as a taxpayer.
  4. SARS, themselves, issued a guide which states that a trust must register for any tax that it may be liable for. The guide then goes on to list nine such taxes and does not include Dividends Withholding Tax (obviously).

So, fear not. Form your trust (or, if you’re wise, get me to form it for you), build your wealth and don’t stress about the tax that it will never pay.


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