The Draft Taxations Laws Amendment Bill, 2016 has been made available for comments.

As far as trusts are concerned a new section 7C is proposed.

The provisions of said section can be summarised as follows:

Result where abovementioned provisions apply:

Summary

  1. Where a person sells an asset to a trust on an interest free loan or charge interest on the loan at a rate lower than the official rate prescribed by SARS (currently 8%);and/or 
  2. Where the trustees of a trust make a distribution to trust beneficiaries and credit the distribution on an interest free loan account or charge interest on the loan at a rate lower than the official rate prescribed by SARS. Since beneficiaries of trusts qualify as connected persons in relation to the trust, it seems as if a loan to the trust by a beneficiary (as a result of a distribution of income or capital from the trust to the beneficiary which distribution was credited on loan account and not paid out) can invoke the provisions of this section.

General

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