Be Prepared As Government Takes Aim At Trusts
Let me tell you how it will beThere’s one for you, nineteen for me‘Cos I’m the taxman, yeah, I’m the taxman
The proposed changes:
- An individual or a connected entity that makes an interest-free or low interest rate loan to a trust will be taxed from 1 March 2017 (if the provisions are passed unaltered). The tax will be the difference between the SARS interest rate of 8% (note this is subject to change) and the interest amount charged,
- If you are taxed under this provision, you have 3 years to recover the tax paid from the trust. If the tax is not recovered, the taxed amount is treated as a donation in your hands as taxpayer.
An example illustrates
Assume you make a R1 million tax-free loan to a trust. In the next tax year you will be liable for tax on R80,000 (8% of R1 million). Let’s further assume that tax payable on this is R32,000 (40% of R80,000)
Share with friends