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Will the settlor of an “amnestied trust” pay CGT on the trust’s assets upon death?

12 August 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: I am dealing with a specific query regarding an "amnestied trust”. I would like to find out if upon the death of the settlor of the trust, he (the settlor) has to pay capital gains tax on the value of the assets in his amnestied trust upon his death.

I am not sure if death results in a deemed disposal for capital gains tax purposes in an amnestied trust.

Can you send me a reference and the applicable Act that I can refer to with regards to this?

A: We submit that the answer lies in section 4 of the Exchange Control Amnesty and Amendment of Taxation Laws Act, 2003.  We copied it below (from subsection (4) onwards). 

Where a person has made an election as contemplated in subsection (1) in relation to a foreign asset-

(a) that person must be deemed to have held that foreign asset -

(i)                  for purposes of this Chapter, from the date that the discretionary trust acquired that foreign asset; and

(ii)                for the purposes of the Income Tax Act, 1962, (other than Part V and VII of Chapter II of that Act) from the first day of the last year of assessment ending on or before 28 February 2003,

until that foreign asset is disposed of by that discretionary trust to any other person, in which case that person shall be deemed to have disposed of that foreign asset for consideration equal to its market value on the date of disposal; and

(b) the provisions of sections 7(5), 7(8) and 25B of the Income Tax Act, 1962, and paragraphs 70, 72 and 80 of the Eighth Schedule to that Act, shall not apply in respect of any income, expenditure or capital gain relating to that foreign asset, while it is so deemed to be held by that person.

(4) In order to make the election contemplated in subsection (1), the person must submit the founding document of the discretionary trust as at 28 February 2003 with the application in terms of section 5.

It is, in terms of paragraph 40 of the Eighth Schedule to the Income Tax Act, that the deceased is deemed to have disposed of the asset to his estate. 

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.  


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