CATEGORIES
- (1) Negotiating Tax Debt and Payment Arrangements with SARS
- (14)Accounting
- (2)Accounting for Income Tax
- (7)Administration of Estates
- (1)Application of tax rates, s6(2) rebates
- (1)Assessed losses
- (4)Audit, Reviews & Other Services
- (9)Blogs
- (8)Capital Gains Tax
- (1)Capital Gains Tax - Individuals Tax
- (1)Capital Gains Tax Implications of Trusts
- (2)Case study: Home office expense
- (1)Case study: Travel allowances
- (1)Company Formations
- (117)Corporate Tax
- (9)Customs and Excise
- (2)Deceased Estate
- (1)Deductions Pre-trade and prepaid expenses
- (1)Deferred tax assets and deferred tax on equity
- (1)Deregistration
- (2)Employer and Employee (PAYE and UIF Specific)
- (1)Estate Duty
- (8)Faculty News
- (2)Farming
- (142)Individuals Tax
- (1)Input - Customs Duty
- (3)Interest
- (13)International Tax
- (17)Legislation
- (1)Low interest rate loans and loan subsidies
- (1)Nature of the rights of beneficiaries
- (1)Notional input tax
- (8)Payroll
- (2)Practical Payroll
- (2)Provisional tax (Link with other Taxes)
- (1)SARS Dispute Resolution
- (4)SARS Issues
- (1)Salaried Employees
- (127)Tax Administration
- (2)Tax Administration Part 2B: Resolving Problems with SARS using the Tax Ombud
- (1)Tax Administration Part 3B Dispute Resolution - Objection and appeal
- (2)Tax Update
- (2)Tax implications of loans to trusts
- (1)Tax residence
- (1)Tax returns and payments
- (1)Transfer-Pricing
- (1)Trust Income / Gain Allocations
- (1)Trust types and income allocations
- (5)Trusts
- (66)VAT
- (3)VAT periods
- (1)Wear and tear allowances
- (1)Zero Rated
- Show All
[FAQ] The donation of a property by a company to a Trust
- 18 June 2021
- Capital Gains Tax
- The Tax Faculty Tax Specialist
This article is based on tax law for the year ending 28 February 2021.
Background
A taxpayer is a business owner currently owning, residing and working from a property worth R3 million. The property is currently registered in the business name (a Pty Ltd). This property is also the taxpayer's primary residence.
The taxpayer wants to transfer this property into a Trust so that the property becomes a protected asset in the long-term, in the case of insolvency.
- Is the company subject to capital gains tax (CGT) when the transfer is done to the Trust?
- Would the Trust pay the CGT, or would the company pay?
- Since the taxpayer is also living in this property (and it is his primary residence), would the CGT be levied on the amount over R2million only?
Answer
The Income Tax Act
If the property is owned by a company, primary residence exclusion will then not be available. Primarily because the individual doesn’t hold an interest in the property. We accept that the individual is not a lessee who hires the residence, or part of the residence owned by the company.
There is indeed a disposal of an asset by the company and a capital gain will arise and be taxed in the company (no exclusion).
As the disposal by the company is at the instance of any person (the taxpayer in this instance), section 57 would deem the property to have been donated by the taxpayer and the taxpayer would pay the donations tax. We accept that this is not actually a dividend.
Webinar Commentary
For further webinar commentary refer to the following webinar: Capital Gains Tax Series here.