Tax and SARS knowledge base
Who pays tax on trust income in South Africa?
Is trust income taxed in the trust, beneficiary, or donor?
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Direct answer
It depends on how the income arose and what happened to it during the year of assessment. South African trust income can be attributed to a donor under the anti-avoidance rules, taxed in a beneficiary when it validly vests in that beneficiary, or taxed in the trust when it is retained or cannot be taxed elsewhere.
An ordinary trust is generally taxed at a flat 45% rate. That rate alone is not a reason to make a year-end distribution without checking the deed, resolutions and legal vesting requirements.
What this means in practice
Trustees should classify each receipt and capital gain, then map it to the donor, beneficiary or trust. A bookkeeping entry made after year-end cannot retroactively create valid vesting. The trust deed and trustee resolution must authorise what happened.
Non-resident beneficiaries, capital gains, interest-free loans and amounts retained for minors need particular care.
Step-by-step
- Reconcile the trust's income and capital transactions.
- Review attribution rules linked to donations or low-interest funding.
- Read the deed before trustees exercise a discretion.
- Pass clear, lawful resolutions within the relevant year.
- Issue beneficiary tax certificates matching the accounts.
- Reconcile the ITR12T with beneficiary and donor returns.
Documents and records to keep
- Trust deed and amendments.
- Signed trustee resolutions and minutes.
- Loan, donation and distribution records.
- Beneficiary tax certificates.
- Annual financial statements and ITR12T.
Important limits and exceptions
The conduit principle is subject to statutory attribution and residence rules. A distribution of cash is not necessarily the same as vesting taxable income, and capital gains have their own rules.
When to get tailored advice
Get advice for discretionary trusts, non-resident beneficiaries, offshore assets, founder loans or substantial capital gains.
Related TaxProof guides
Sources
- SARS, Types of Trust
- SARS, Trust Tax Rates