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South Africa: Tax legislative changes for trusts, update

South Africa: Tax legislative changes for trusts

South African taxpayers have seen a number of anti-avoidance provisions proposals over the last three years, with a focus on the taxation of trusts and controlled foreign companies (CFC).

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Draft legislation (the 2018 Taxation Laws Amendment Bill) relating to trusts and CFCs was proposed earlier this year, with subsequent comments received from tax practitioners and the public. Initially, the draft legislation proposed that, with respect to a foreign trust structure with South African beneficiaries or donors, the capital gains tax-related participation exemption be disregarded in its entirety for purposes of inclusion of capital gains in terms of paragraphs 72 and 80 of the Eighth Schedule to the Income Tax Act. This removal of the participation exemption, in its entirety, did not align with the proposed amendments to the participation exemption in respect of foreign dividends (which would have only removed the participation exemption when the more than 50% of the participation rights or voting rights were held by a taxpayer).

The discrepancy was noted in comments, with the tax authorities and National Treasury ultimately agreeing so that the final tax legislative proposal aligns the amendments to the participation exemption for both foreign dividends and capital gains tax with respect to shares held by a foreign trust in a foreign company.

 

Read a November 2018 report [PDF 110 KB] prepared by the KPMG member firm in South Africa

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