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[FAQ] Transfer duty exemption on a capital distribution of a property from a trust
- 23 August 2021
- Administration of Estates
- The Tax Faculty Tax Specialist
This article is based on tax law for the year ending 28 February 2021.
Background
What provision in the Transfer Duty Act deals with the applicability of transfer duty to a capital distribution from a trust i.e. will there be any transfer duty payable on a capital distribution of a property from a trust to a beneficiary or will the exemption be limited to the third degree of relation to the founder of the Trust?
Answer
The Transfer Duty Act
You have 9(4)(b) of the Transfer Duty Act in mind. It provides for exemptions from the duty and the relevant parts read as follows:
(4) No duty shall be payable –
(a) in respect of a change in the registration of property required as a result of the termination of the appointment of an administrator of a trust under a will or other written instrument or of a trustee of an insolvent estate; or
(b) where trust property is transferred by the administrator of a trust in pursuance of the will or other written instrument in pursuance of which the administrator was appointed –
(i) to the persons entitled thereto under such will; or
(ii) to a relative as contemplated in the definition of 'relative' in section 1 of the Estate Duty Act, 1955 (Act No. 45 of 1955), where the trust was founded in terms of such other written instrument by a natural person for the benefit of such relative: Provided that no consideration is paid directly or indirectly by such relative in respect of the acquisition of such trust property; or …
In the Estate Duty Act and in any regulations made thereunder, unless the context otherwise indicates “relative”, in relation to any person, means the spouse of such person or anybody related to him or his spouse within the third degree of consanguinity, or any spouse of anybody so related, and for the purpose of determining the relationship between any child referred to in the definition of 'child' in this sub-section and any other person, such child shall be deemed to be related to its adoptive parent in the first degree of consanguinity – see section 1.
Webinar Commentary
Refer to the following webinar: Monthly Tax Update - August 2021 here.