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New anti-avoidance rules for Trusts

30 November 2016

The 2016 Taxation Laws Amendment Bill proposes and introduces a new anti-avoidance measure in the context of low-interest or interest-free loans made to trusts. The purpose is this new legislation, section 7C of the Income Tax Act, is to address the avoidance of donations tax and estate duty through the transfer of assets to trusts on loan account. Foregone interest will now be a deemed donation and the donor will be liable for donations tax on this deemed donation.

The provision will be effective from 1 March 2017 and will apply to any amount owed by a trust in terms of a loan, advance or credit, whether that amount was provided to the trust before, on, or after 1 March 2017.

Please contact us for an in-depth discussion on how this new legislation might affect you.