Buying Property or Doing Business Through a Trust
Legal and Tax Summary
Reviewed and updated for accuracy against current SARS rates and the 2026/27 National Budget · August 2026
Definition
A Trust in the narrow sense refers to the legal institution where an intermediate person or persons — the trustee(s) — hold prop
Definition
thereof, in their capacity as trustee, in accordance with the expressed wishes of another person (the settlor or founder), not for their personal benefit but for the benefit of named or ascertainable beneficiaries, or for an impersonal object.
In other words, if you form a Trust you are known as the Founder/Settlor. You appoint trustees in terms of the trust deed to manage the trust’s affairs for the benefit of the beneficiaries that you also name in the trust deed.
There are two types of trusts. An inter vivos (living) trust is formed by a founder who executes a written Trust Deed, in terms of which they agree to transfer certain assets during their lifetime to one or more trustees, who administer the assets in terms of the Trust Deed. A testamentary trust is created in terms of the will of a deceased person — it only comes into existence on the founder’s death, after which the assets are administered by the trustees in terms of the will.
2. Legal Structure
- Registration: at the Master of the High Court, who issues Letters of Authority in favour of the trustees.
- Established by a Deed of Trust.
- Parties to the Deed of Trust: Founder/Settlor, Trustees, Beneficiaries.
- Administered by the trustees, with powers as specified in the Deed of Trust.
- No audit requirements, although proper administration is essential to avoid a court “looking through” the trust and treating its assets as the founder’s personal property.
3. Taxes
Transfer Duty
A trust pays transfer duty on the same progressive scale as natural persons. This has applied uniformly to individuals, companies, close corporations, and trusts since 23 February 2011.
Value of property | Rate |
R0 – R1,210,000 | 0% |
R1,210,001 – R1,663,800 | 3% of value above R1,210,000 |
R1,663,801 – R2,329,300 | R13,614 + 6% above R1,663,800 |
R2,329,301 – R2,994,800 | R53,544 + 8% above R2,329,300 |
R2,994,801 – R13,310,000 | R106,784 + 11% above R2,994,800 |
Above R13,310,000 | R1,241,456 + 13% above R13,310,000 |
Table effective 1 April 2025, unchanged for the 2026/27 tax year.
Capital Gains Tax
An ordinary (non-special) trust includes 80% of a net capital gain in taxable income, taxed at the trust’s flat 45% income tax rate, giving an effective rate of 36%.
Item | Rate |
Inclusion rate (trust) | 80% |
Trust income tax rate | 45% (flat, no rebates, no sliding scale) |
Effective CGT rate (gain retained in trust) | 36% |
If gain vested in a resident beneficiary in the same tax year | Taxed in beneficiary’s hands at their own marginal/effective rate (conduit principle) |
If the capital gain is vested in a resident beneficiary in the same tax year it arises (the conduit principle), it retains its nature and is taxed in the beneficiary’s hands at their own rate instead of the trust’s 45%/36%. Where distribution is not made in the same year of assessment, the conduit principle does not apply and the gain is taxed in the trust. Proper administration and timing of distributions is essential.
Note: Since 1 March 2024, the conduit principle no longer applies to amounts distributed to non-resident beneficiaries — such distributions are taxed in the trust itself at the full 45%/36% rates, regardless of vesting.
Estate Duty
Trusts do not die, so no estate duty is payable on the trust itself. Any shares in a company, member’s interest in a close corporation, or other assets held in the trust are owned by the trust, not by the individual, and so do not increase the estate duty payable by an individual founder or beneficiary on death. Properly constituted, trust assets also cannot be attached by the creditors of beneficiaries. It is important to note that if the founder has a loan account with the trust — i.e. they lent funds to the trust rather than donating them outright — that loan claim is an asset in the founder’s personal estate and is dutiable, even though the trust’s own assets are not.
Separately, Section 7C of the Income Tax Act imposes an annual deemed donation (subject to donations tax, currently 20% on cumulative donations up to R30 million and 25% above that in a tax year) where a natural person, or a company connected to that person, provides an interest-free or low-interest loan to a trust. This applies whether or not the loan is ever repaid, and is a standing annual charge for as long as the loan remains outstanding on non-commercial terms.
4. Other Tax Considerations
VAT
No transfer duty is payable if the seller is registered for VAT (and the property forms part of the operations for which the seller is registered) — but VAT at the rate of 15% is payable instead. If the contract does not specify that VAT is payable over and above the purchase price, VAT is deemed to be included in the purchase price.
If the property is sold as a rental enterprise or as a going concern (e.g. a guesthouse), the deed of sale must contain certain specific provisions and the sale may be zero-rated for VAT. This means that neither transfer duty nor VAT is payable.
If the purchaser registers for VAT, the VAT (or the transfer duty) can be claimed back as an input credit in certain defined circumstances.
Income Tax
If a property investor does not acquire a property with the intention of holding it indefinitely or for rental purposes, but rather with the intention of selling it at a profit, SARS may regard the investor as a dealer and levy income tax at the investor’s applicable tax rate on the profit. Capital gains tax does not apply where income tax is payable on the profit.
