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Trusts and Estate Planning

When planning an Asset for Share swap using the s42 provisions in the Income Tax Act, you will see that the shares have to be new issues, not existing shares.

As we invariably want all of the shares to be owned by a trust, we find it best to use a new company.

The way an Asset for Share swap works is the new company issues 100% of its shares to the trust in return for an asset or assets (usually fixed property). There is no tax against this transaction. No CGT, no Transfer duty, no tax. There are, however, conveyancer’s fees, if the asset is property.

It’s a great way to rectify a poor structure.

I am often asked about the difference between a s42 company and a regular (Pty) Ltd. The answer is, quite simply, none. They are the same, and they cost the same.


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