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Tax changes for trusts ‘still being considered’

Friday, 28 June 2013   (0 Comments)
Posted by: Author: Amanda Visser
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Author: Amanda Visser (Business day,

Changes to the tax treatment of trusts, announced by Finance Minister Pravin Gordhan in his February budget speech, are still under consideration and it seems unlikely they will be introduced soon.

Mr Gordhan said in February certain aspects of local and offshore trusts had long been a problem for global tax enforcement due to their "flexibility and flow-through nature". He also expressed concern about the use of trusts to avoid estate duty. Tax revenue budgeted for estate duty for the 2013-14 tax year is R900m and the concern is that it is so low because of tax avoidance.

A technical note published by the South African Institute of Tax Practitioners indicated that the Treasury has not finalised any tax changes and that any amendments would first be discussed and put out for public comment, which is not expected in the short term.

The Treasury said there has been consultation with the relevant role players. "It would therefore be premature to comment while the consultation process is under way," a spokeswoman said on Thursday.

According to the institute’s note, a meeting had been set up with the Treasury and the South African Revenue Service to "obtain a better understanding of their intentions with regard to local trusts and offshore foundations".

Bernard Sacks, a partner at global audit, accounting and consulting group Mazars, said to overturn the principles that have governed trusts for decades was not something that should be undertaken lightly.

"I question whether you have to take a sledgehammer to a fly. If there is abuse of the system, our tax legislation contains anti-avoidance measures that can be invoked against individuals who are abusing the system, but there is no need to ruin it for everybody."

Mr Sacks said the approach by the Treasury was that everybody who used a trust in a structure was in effect doing it for tax-beneficial reasons. He said that in most cases he had encountered, the use of a trust in a structure had not been for tax purposes.

There may be a favourable benefit, but people use it for asset protection, for continuity purposes in a business, and for family purposes to protect a young adult who inherits a large amount of money.

These were issues that should not be lost sight of, he said.

In most cases there are legitimate family and business reasons for including a trust in a structure, Mr Sacks said.



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