Category: Section 25B (ITA) – Income of trusts and beneficiaries of trusts

Section 25B

 

Section 25B inserted by section 27 of Act 129 of 1991, amended by section 22 of Act 141 of 1992, section 36 of Act 30 of 1998, section 32 of Act 59 of 2000 and section 14 of Act 19 of 2001 and substituted by section 27 of Act 32 of 2004.

Section 25B (ITA) – Income of trusts and beneficiaries of trusts

Posted on by admin_kmos

25B.     Taxation of trusts and beneficiaries of trusts

[Heading amended by section 28(a) of Act 23 of 2020]

 

(1)     Any amount (other than an amount of a capital nature which is not included in gross income or an amount contemplated in paragraph 3B of the Second Schedule) received by or accrued to or in favour of any person during any year of assessment in his or her capacity as the trustee of a trust, shall, subject to the provisions of section 7, to the extent to which that amount has been derived for the immediate or future benefit of any ascertained beneficiary, who is a resident and has a vested right to that amount during that year, be deemed to be an amount which has accrued to that beneficiary, and to the extent to which that amount is not so derived, be deemed to be an amount which has accrued to that trust.

[Subsection (1) substituted by section 28(b) of Act 23 of 2020 and by section 29(1)(a) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]

 

(2)     Where a beneficiary who is a resident has acquired a vested right to any amount referred to in subsection (1) in consequence of the exercise by the trustee of a discretion vested in him or her in terms of the relevant deed of trust, agreement or will of a deceased person, that amount shall for the purposes of that subsection be deemed to have been derived for the benefit of that beneficiary.

[Subsection (2) substituted by section 29(1)(b) of Act 17 of 2023 with effect from 1 March, 2024 and applicable in respect of years of assessment commencing on or after that date]

 

(2A)  Where during any year of assessment any resident acquires any vested right to any amount representing capital of any trust which is not a resident, that amount must be included in the income of that resident in that year, if –

 

(a)     that capital consists of or is derived, directly or indirectly, from any receipts and accruals of such trust which would have constituted income if such trust had been a resident, in any previous year of assessment during which that resident had a contingent right to that amount; and

[Paragraph (a) substituted by section 48 of Act 23 of 2018 effective on 1 March 2019, applies in respect of any year of assessment commencing on or after that date]

 

(b)     that amount has not been subject to tax in the Republic in terms of this Act.

 

(2B)  In determining, for purposes of subsection (2A), whether an amount received by or that accrued to a trust which is not a resident would have constituted income had that trust been a resident, the provisions of section 10B(2)(a) must be disregarded in respect of an amount received or accrued consisting of or derived, directly or indirectly, from a foreign dividend-

 

(i)      paid or payable by a company if-

 

(aa)   more than 50 per cent of the total participation rights, as defined in section 9D(1), or of the voting rights in that company are directly or indirectly held or are exercisable, as the case may be, by that trust whether alone or together with any one or more persons that are connected persons in relation to that trust; and

 

(bb)   that resident or any person that is a connected person in relation to that resident is a connected person in relation to that trust; and

 

(ii)     to the extent to which that foreign dividend is not derived from an amount that must be included in the income of or that must be attributed as a capital gain to-

 

(aa)   the resident who acquired the vested right to the amount referred to in subsection (2A); or

 

(bb)   a resident who is a connected person in relation to the resident referred to in item (aa).

[Subsection (2B) inserted by section 48 of Act 23 of 2018 effective on 1 March 2019, applies in respect of any year of assessment commencing on or after that date]

 

(3)     Any deduction or allowance which may be made under the provisions of this Act in the determination of the taxable income derived by way of any amount referred to in subsection (1), must, to the extent to which that amount is under that subsection deemed to be an amount which has accrued to –

 

(a)     a beneficiary, be deemed to be a deduction or allowance which may be made in the determination of the taxable income derived by that beneficiary; and

 

(b)     the trust, be deemed to be a deduction or allowance which may be made in the determination of the taxable income derived by that trust.

 

(4)     The deduction or allowance contemplated in subsection (3) which is deemed to be made in the determination of the taxable income of a beneficiary of a trust during any year of assessment, shall be limited to so much of the amount deemed to have been received by or accrued to that beneficiary in terms of subsection (1), as is included in the income of that beneficiary during that year of assessment.

 

(5)     The amount by which the sum of the deductions and allowances contemplated in subsection (4) exceeds the amount included in the income of the beneficiary during a year of assessment as contemplated in that subsection –

 

(a)     is deemed to be a deduction or allowance which may be made in the determination of the taxable income of the trust during that year: Provided that the sum of those deductions and allowances shall be limited to the taxable income of that trust during that year of assessment as calculated before allowing any deduction or allowance under this subsection; or

 

(b)     where the trust is not subject to tax in the Republic, must be carried forward and be deemed to be a deduction or allowance which may be made in the determination of the taxable income derived by that beneficiary by way of amounts referred to in subsection (1) during the immediately succeeding year of assessment.

 

(6)     The amount by which the sum of the deductions and allowances contemplated in subsection (4) exceeds the sum of the amount included in the income of the beneficiary as contemplated in subsection (4) and the taxable income of the trust as contemplated in subsection (5)(a), must be deemed to be a deduction or allowance for purposes of subsection (3), which may be made in the determination of the taxable income derived by that beneficiary by way of any amount referred to in subsection (1) during the immediately succeeding year of assessment.

 

(7)     Subsections (4), (5) and (6) do not apply in respect of any amount which is deemed to have accrued to any beneficiary in terms of subsection (1), where that beneficiary is not subject to tax in the Republic on that amount.