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News & Press: Individuals Tax

Potential amendments affecting foreign trusts holding shares in foreign companies

Wednesday, 27 June 2018   (0 Comments)
Posted by: Author: Joon Chong
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Author: Joon Chong (Webber Wentzel)

National Treasury has held a few workshops this year to engage with stakeholders on proposed amendments before the draft amendment bills are circulated for comment. At one of these workshops attended by the Webber Wentzel Tax Team, National Treasury indicated that there could be amendments in the draft bills which would affect resident beneficiaries and donors to foreign trusts, where these foreign trusts hold shares in foreign companies.

Currently, the Income Tax Act 58 of 1962 contains attribution rules which are anti-avoidance rules designed to ensure that any income (eg foreign dividends) or capital gain (ie from sale of foreign shares) would continue to be taxed in the resident donor where the donation, settlement or disposition made to the foreign trust was used to acquire foreign shares.

Currently, foreign dividends received by a resident who holds more than 10% in the foreign company would be exempt from South African income tax. When a resident holding more than 10% in a foreign company disposes of any of these shares, any capital gains arising from the disposal is also disregarded for South African capital gains tax purposes.  

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