A–Z of trust & restructuring terms
Definitions are general information, not legal advice. For the figures behind the tax terms, see the 2026 rates reference; for the authorities, the source library.
- Trust
- A legal arrangement, governed by the Trust Property Control Act 57 of 1988, in which a founder transfers assets to trustees who hold and administer them for beneficiaries. A trust has no separate legal personality — the trustees act in their representative capacity.
- Founder (settlor / donor)
- The person who creates the trust and puts the first assets or funding into it. South African tax law watches the founder closely, because donations and loans by the founder can pull income and gains back to them under the attribution rules and section 7C.
- Trustee
- A person who holds and manages trust property for the beneficiaries. Trustees owe a statutory duty of care (TPCA s 9) and may act only once the Master of the High Court has issued Letters of Authority.
- Independent trustee
- A trustee who is not the founder, a beneficiary or a family member of either. Appointing at least one genuinely independent trustee, and minuting real decisions, helps avoid the trust being treated as the founder’s alter ego.
- Beneficiary
- A person who may benefit from the trust. Under the Income Tax Act a beneficiary is anyone with a vested or contingent interest in the receipts, accruals or assets of the trust.
- Vested right
- A fixed, enforceable right to trust income or capital that the trustees must pay over. Income vested in a resident beneficiary in the year it is earned is taxed in that beneficiary’s hands under the conduit principle.
- Discretionary (contingent) right
- A mere hope (spes) of benefiting, dependent on the trustees exercising their discretion or on a future event such as reaching a set age. A discretionary beneficiary cannot force a distribution.
- Inter vivos trust
- A “living” trust created during the founder’s lifetime by registering a trust deed with the Master. It is the structure used for most asset-protection and estate-planning trusts.
- Testamentary trust
- A trust created by a will that comes into existence on the testator’s death, commonly used to provide for minor children or a vulnerable dependant.
- Special trust
- A trust defined in the Income Tax Act for tax purposes: paragraph (a) is a disability trust (for a person with a disability, inter vivos or testamentary); paragraph (b) is a testamentary trust for a deceased’s relatives where the youngest is under 18. A special trust is taxed on the individual sliding scale, not the flat 45%.
- Bewind trust
- A trust in which the beneficiaries own the trust assets and the trustees merely administer them — the reverse of the usual structure. Income and gains are taxed in the beneficiaries’ hands.
- Master of the High Court
- The official who registers inter vivos trusts, issues Letters of Authority to trustees, and holds the trust’s beneficial-ownership register.
- The document the Master issues authorising a trustee to act. Trustees who act before receiving Letters of Authority may find their actions void and may be personally liable.
- Trust deed
- The founding document that identifies the founder, trustees and beneficiaries, describes the trust property, and sets out the trustees’ powers, the decision-making rules and the trust’s duration.
- Conduit principle
- The rule that a trust is a conduit (pipe): income or a capital gain vested in a resident beneficiary in the same year is taxed in the beneficiary’s hands, not the trust’s (section 25B for income; paragraph 80 of the Eighth Schedule for capital gains).
- Attribution rules
- Anti-avoidance rules (section 7 and Eighth Schedule paragraphs 68–72) that tax income or gains in the hands of the founder where they reach a beneficiary because of a donation, settlement or other disposition by the founder — at their sharpest for minor children.
- Connected person
- A defined relationship (Income Tax Act s 1(1)) that switches on most anti-avoidance rules. A founder, the trust, its beneficiaries and a company the trust controls are almost always connected to one another.
- A corporate roll-over: a person transfers an asset to a resident company and receives equity shares in return, with no immediate capital gains tax, provided they hold a qualifying interest. The company inherits the asset’s base cost, so the gain is deferred, not forgiven.
- Roll-over relief (sections 41–47)
- The Part III rules that defer tax on a genuine reorganisation — asset-for-share (s 42), amalgamation (s 44), intra-group (s 45), unbundling (s 46) and liquidation distribution (s 47) — by having the parties step into each other’s base cost.
- Qualifying interest
- The shareholding a transferor must hold for section 42 to apply. For an unlisted company it is at least 10% of the equity shares and at least 10% of the voting rights.
- Base cost
- The amount subtracted from proceeds to work out a capital gain — broadly what was paid for the asset plus qualifying costs. Under a section 42 transfer, the company takes over the transferor’s base cost.
- Donations tax
- A 20% tax (25% on the cumulative value above R30 million) on the value of anything given away for nothing or for too little. The donor pays. Natural persons have a R150,000 annual exemption (from the 2026 Budget, subject to enactment).
- Section 7C
- The anti-avoidance rule that treats the interest you give up on an interest-free or low-interest loan to your trust (or a company it controls) as a fresh donation every year, calculated at the official rate of interest.
- Official rate of interest
- The South African repo rate plus one percentage point — 8% from 1 June 2026 (repo 7%). It is used to calculate the section 7C deemed donation.
- Estate duty
- A duty of 20% on the dutiable estate up to R30 million and 25% above, levied on death. Putting growth assets under a trust caps the founder’s estate, though the loan account they take out stays in it.
- Capital gains tax (CGT)
- Tax on the gain when an asset is disposed of. Effective rates: 18% for individuals and special trusts, 21.6% for companies, and 36% for ordinary trusts. The trust rate is 36%, not 18%.
- Inclusion rate
- The portion of a capital gain that is included in taxable income before the income-tax rate is applied — 40% for individuals and special trusts, 80% for companies and ordinary trusts.
- Dividends tax
- A 20% tax withheld when a company pays a dividend (for example, when a Newco passes profit up to the trust). The conduit principle does not switch it off.
- Securities transfer tax (STT)
- A 0.25% tax on transferring shares — relevant when a Newco’s shares move to the trust. Transfers under the Part III roll-over rules are exempt, and an issue of new shares is not a transfer.
- Transfer duty
- A tax on acquiring property, on a sliding scale from 0% (up to R1.21 million) to 13% (above R13.31 million). A section 42 transfer is exempt — via section 9(1)(l) of the Transfer Duty Act for a non-VAT-vendor, or section 9(15A) where both parties are VAT vendors.
- Residential property company
- A company more than half of whose assets (by fair value) is residential property. Buying the shares in such a company is taxed for transfer duty as if you bought the property itself.
- Solvency and liquidity test
- The Companies Act s 4 test a company’s board must pass before making any distribution — its assets must exceed its liabilities and it must be able to pay its debts for the next 12 months.
- Beneficial owner
- The natural persons who ultimately own or control a trust or company. Both the trust (at the Master, TPCA s 11A) and the company (at CIPC) must keep a register of their beneficial owners.
- IT3(t)
- The annual third-party return a resident trust files with SARS, reporting every amount it vested in a beneficiary. SARS matches it against the beneficiaries’ own returns.
- ITR12T
- The annual income tax return for a trust, filed in addition to the IT3(t).
- Alter ego (sham) trust
- A trust the founder controls so completely that a court treats it as the founder’s own — disregarding it, exposing the assets to the founder’s creditors and undoing the tax planning (the Parker problem).
- Newco
- A newly formed private company used to hold an asset (such as property) beneath a trust in a trust-and-company structure.
- Loan account
- The amount a founder is owed after selling an asset or shares to the trust on credit. It stays an asset of the founder’s estate, and if interest-free or low-interest it triggers section 7C.