If a trust distributes income in whose hands will this be taxable? If a Trust is a beneficiary of another Trust and they receive a distribution from that Trust who should be taxed?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
The general rules found in section 25B(2), read with section 25B(1) and which is subject to section 7. For purposes of the guidance that follows we accept that section 7 doesn’t apply – no donation, settlement or other disposition, such as an interest free loan.
You referred to ‘income’ and we accept that the issue is not raised because of SARS’s view that a recipient trust “must account for the capital gain, and the vesting of the same asset” by the recipient trust in a beneficiary (of the recipient trust) will not result in the capital gain being attributed to this beneficiary (the recipient trust).
With regard to amounts received by or accrued to a trust, the same doesn’t apply when the amount is deemed to be that of the trust as beneficiary under section 25B(1). In essence then, section 25B(1) doesn’t have the same wording as the relevant paragraphs in the Eighth Schedule and can well be interpreted that amounts vested ‘flows through to the ultimate beneficiary’.