[FAQ] Dividend To A RSA Trust Then Distributed To A RSA Beneficiary

[FAQ] Dividend To A RSA Trust Then Distributed To A RSA Beneficiary

• 07 September 2023
• Trusts
• The Tax Faculty Tax Specialist

This article is based on tax law for the year ending 29 February 2024.

Question:

When a dividend is distributed from a Close Corporation (CC) to a South African Trust, it’s subject to Dividend Withholding Tax (DWT) at the CC level. What then are the tax implications when this net dividend is subsequently distributed to a South African beneficiary? Would the beneficiary face additional taxation on this amount, or does it maintain the same tax status as the dividend income within the trust?

Answer:

The conduit principle ensures that the nature of the income remains unchanged when distributed to the beneficiary. Typically, if the trust distributes the dividend to the beneficiary within the same year it was received, the beneficiary will not be subject to taxation on that amount.

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