Binding Class Ruling (BCR) 031 was originally issued on 14 October 2011 and deals withthe question as to whether –
dividends received and distributed by a trust will retain its nature as dividends in the hands of the beneficiaries of the trust; and
beneficial units allocated to beneficiaries will constitute equity instruments in their hands.
The ruling made in connection with the proposed transaction is as follows:
Any distribution made by the trustees of the Trust to the Beneficiaries (Employees) will, if the distribution is made within the same year of assessment in which the dividend was received by or accrued to the Trust, retain the character of a dividend in the hands of the Beneficiaries (Employees).
Such distributions will be exempt in the hands of the Beneficiaries (Employees) under section 10(1)(k)(i).
The Beneficial Units will not constitute equity instruments as defined in section8C in the hands of the Beneficiaries (Employees).
SARS indicated on 17 October 2012 that the underlying principles confirmed in this ruling are currently under review. This ruling is only binding in respect of the specific class members to whom it was issued and may not be relied upon by a third party.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.