What is a trust-and-company structure?

It is a three-layer estate-planning structure: a company (often a newly formed Newco) owns the asset, a discretionary trust owns the shares in that company, and the family are the beneficiaries. Rent or sale proceeds flow up to the trust, which distributes to beneficiaries at the trustees’ discretion. It is used to peg the founder’s estate, protect assets, and provide continuity across generations.

Why use a company AND a trust, rather than just a trust?

A company gives operational flexibility and a 27% income-tax rate on retained trading or rental profit (versus a trust’s flat 45%), while the trust holding the shares delivers the estate-planning and asset-protection benefits and keeps the asset out of successive deceased estates. The combination also makes future acquisitions and group reorganisations easier under the corporate roll-over rules.

Is the structure mainly about saving income tax?

No. A trust is taxed harshly (45% on retained income, 36% effective CGT), so the structure is rarely about saving income tax today. It is about pegging the estate, protecting assets from future creditors, and continuity. The income-tax efficiency comes from the conduit principle (vesting income in beneficiaries), not from the trust holding income itself.

The Trust-and-Company Structure in South Africa: How It Works & Why People Build It [2026]

What the structure looks like

The structure has three layers, plus the people who benefit:

A company (often a newly formed private company, Newco) owns the asset — here, immovable property.
A trust owns the shares in that company.
The beneficiaries (typically the founder, a spouse, children and often later generations) are those to whom the trustees can distribute income, capital gains or capital.

Trust structure

The three parties to a South African trust

Governed by the Trust Property Control Act 57 of 1988. The founder can also serve as a trustee, but not as the sole trustee or sole beneficiary.

Because the trust — not the founder — owns the shares, the property is generally beyond the reach of the founder’s personal creditors. The Trust Property Control Act reinforces this by keeping trust property separate from the trustee’s own estate:

Source — the actual words

Trust property shall not form part of the personal estate of the trustee except in so far as he as the trust beneficiary is entitled to the trust property.

Trust Property Control Act 57 of 1988, s 12 — separate position of trust propertyRead it on Dept of Justice PDF

Meet the players — and why they are nearly always “connected persons” to one another — on the players & connected persons.

Why people build it

The structure is about four longer-term goals, not income tax today:

Pegging the estate. Once the property sits under the trust, its future growth accrues to the trust, not the founder — capping the founder’s dutiable estate (though the loan account they take out stays in it). Estate duty is 20% on the dutiable estate to R30 million and 25% above.
Asset protection. The trust, not the founder, owns the shares, so the asset is generally beyond the founder’s personal creditors (TPCA s 12, above).
Continuity and flexibility. A trust does not die, so the asset need not be transferred and re-taxed on each death; a discretionary trust lets the trustees decide each year who receives what.
Provision for family across generations.

Every one of these benefits depends on the founder genuinely giving up control — see trustees’ duties and the independent-trustee rule.

The headline trade-off

A trust that keeps income is taxed at a flat 45% — the highest rate in the system — and pays capital gains tax at an effective 36%. An individual is taxed on a sliding scale and pays CGT at a top effective rate of 18%; a company pays 27% income tax and 21.6% effective CGT. This is why these structures rely on the conduit principle: income and gains are usually vested in beneficiaries in the same year so they are taxed in the beneficiaries’ hands, often at lower rates. The catch — and the rest of this guide — is the web of rules that decides when that works.

The Nkosi family — our running example

The asset is normally moved in under a section 42 asset-for-share transaction: Thabo transfers the property to Newco and, in exchange, Newco issues him shares. Because he ends up holding a qualifying interest (here, 100% of Newco), the relief deems the disposal to happen at base cost — so the built-in R4 million gain is deferred, not forgiven, and Newco inherits the same base cost.

Source — the actual words

“asset-for-share transaction” means any transaction— (a)(i) in terms of which a person disposes of an asset …, the market value of which is equal to or exceeds— (aa) in the case of an asset held as a capital asset, the base cost of that asset on the date of that disposal …, to a company which is a resident, in exchange for the issue of an equity share in that company and that person— (A) at the close of the day on which that asset is disposed of, holds a qualifying interest in that company; or (B) is a natural person who will be engaged on a full-time basis in the business of that company … of rendering a service; …

Income Tax Act 58 of 1962, s 42(1) — definition of “asset-for-share transaction” (extract)Read it on gov.za

Source — the actual words

… where a person disposes of an asset to a company in terms of an asset-for-share transaction— (a) that person must be deemed to have— (i) disposed of that asset— (aa) … for an amount equal to the [base cost / section 11(a) or section 22 amount] …; and (ii) acquired the equity shares in that company on the date that such person acquired that [asset] …

Note — This is the deferral: no gain arises on the transfer, and the company takes over the transferor’s base cost and acquisition date. The deferred gain surfaces later — when Newco sells the property, or the shares change hands. The full mechanics are on the section 42 page.

Income Tax Act 58 of 1962, s 42(2)(a) — the roll-over relief (extract)Read it on gov.za

Section 42 leaves the property already inside Newco, but Thabo still has to fund the trust’s purchase of his Newco shares. That is usually done by loan — and an interest-free or soft loan to a connected trust falls under the section 7C anti-avoidance rule, which treats the foregone interest as an annual deemed donation:

Source — the actual words

If a trust or company incurs— (a) no interest in respect of a loan, advance or credit referred to in subsection (1), (1A) or (1B) …; or (b) interest at a rate lower than the official rate of interest, an amount equal to the difference between the amount incurred … as interest … and the amount that would have been incurred … at the official rate of interest must, for purposes of [the donations tax Part], be treated as a donation made to that trust by the [lender] on the last day of that year of assessment …

Note — The deemed donation each year is the interest shortfall (loan × the official rate, less interest actually charged). It can be sheltered by the R100,000 annual donations-tax exemption. The detail is on funding: donations & loans.

Income Tax Act 58 of 1962, s 7C(3) — the deemed donation (extract)Read it on gov.za

Build it, step by step

The restructuring guide follows the life of the structure from beginning to end: moving the asset in, funding it, running it, and keeping it compliant. Start anywhere.

The restructuring guide · 18 guides

Inside the structure