Time to Rethink Foreign Trust Structure [South Africa]

Foreign trusts have historically been the “automatic structure” chosen to hold funds sent offshore by South African residents that have to pay tax to the country. New legislation has passed that now creates a tax liability for certain loans paid to trusts. One way to avoid the tax liability is to be charged the official rate of interest (repurchase rate plus 100 basis points).

“The official rate of interest for a loan held in South African rand is currently 7.5%, but it has been foreshadowed in the 2017 Budget Review that it could be adjusted upwards to a more ‘market-related’ rate.”

The costs of maintaining trusts has increased over time, and due to the increase in possible taxes or interest rate, trusts should not be used for small or minimal amounts.

See Amanda Visser, Time to Rethink Foreign Trust Structure, Moneyweb, May 29, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.