Why put property in a company at all
In the classic structure, a newly formed private company (Newco) owns the property and the trust owns the shares in Newco. The company is the legal owner of the bricks and mortar; the trust holds the value through its shareholding; and the beneficiaries receive whatever the trustees decide to distribute. The reasons to interpose a company are practical — ring-fencing the property in its own legal entity, making it easy to bring in co-owners or future properties as a group, and keeping the asset one step further from the founder’s personal creditors.
But the company layer is not free. Whatever the company earns is taxed in the company first, and getting that money up to the trust (and ultimately to the family) is a second taxable event. Before you build it, weigh the company route against owning the property directly in the trust — see trust versus company for the head-to-head.
How the company is taxed: rent and capital gains
Rent received by Newco is ordinary income, taxed in Newco at the company rate of 27%. When Newco eventually sells the property, the capital gain is taxed in the company too — and here the rate matters a great deal. A company includes 80% of its capital gain in income and is taxed at 27%, giving an effective CGT rate of 21.6%.
Effective CGT rates — Individuals and Special Trusts 18%; Companies 21.6%; Other Trusts 36%.
Note — The current company effective CGT rate is [21.6% (27% × 80%), following the 2023 reduction of the company income-tax rate to 27%]; an older SARS guide still showing 22,4% predates that reduction.
Two points decide whether this is a good or bad place to hold the asset. First, the company effective rate of 21.6% sits below the standard trust rate of 36%, so a company is a cheaper place to realise a gain than a discretionary trust. Second, and against that, a company gets no primary-residence exclusion: the R3 million exclusion that a natural person keeps on selling a home simply does not exist for a company. That single difference is why a home rarely belongs in a company.
| Tax | Applies to | Rate (2026) |
|---|---|---|
| Income tax — trust | Income retained in an ordinary trust | 45% (flat) |
| Income tax — company | Newco's rental / trading profit | 27% |
| Income tax — individual | Income vested in a resident beneficiary | Up to 45% (sliding scale) |
| CGT — trust | Gain retained in an ordinary trust (80% inclusion) | 36% effective |
| CGT — company | Gain in a company (80% inclusion) | 21.6% effective |
| CGT — individual / special trust | Gain in a person / special trust (40% inclusion) | 18% effective |
| Dividends tax | Company pays a dividend upward | 20% |
| Donations tax | Gifts / s 7C deemed donations (25% over R30m cumulative) | 20% |
| Estate duty | Dutiable estate on death (25% over R30m) | 20% |
| Securities transfer tax | Transfer of shares (e.g. Newco shares to the trust) | 0.25% |
| VAT | Standard-rated supplies (e.g. commercial property by a vendor) | 15% |
| Official rate of interest | s 7C deemed donation on low/no-interest loans (repo 7% + 1%) | 8% (from 1 Jun 2026) |
| Transfer duty | Acquiring property — sliding scale | 0% to R1.21m … 13% above R13.31m |
Last reviewed: 3 June 2026. Rates are South African and time-sensitive; 2026 Budget measures (donations-tax exemption increases, resident-spouse limitation) are subject to Parliament's legislative process. A special trust is taxed on the individual sliding scale (CGT 18%), not the flat 45% / 36% that applies to an ordinary trust. Confirm every figure against the current SARS material before acting.
Getting cash out: dividends versus returns of capital
The company pays its tax, but the profit is still trapped inside Newco. Moving it up to the trust is a separate, taxable step. When Newco passes profits up as a dividend, dividends tax of 20% is withheld. The conduit principle that lets a trust flow income through to beneficiaries does not switch dividends tax off — it is a separate, largely final tax on the distribution itself.
A return of contributed tax capital is treated differently. Paying back what was originally subscribed for the shares is not a dividend, so it is not subject to dividends tax — though it reduces the shareholder’s base cost in the shares. This is one reason the share capital and the loan account are set up carefully at the outset: a sensible mix leaves a route to extract value as a return of capital before dividends become the only way out.
When a property company makes sense — and when it does not
The honest position is that a property company beneath a trust earns its keep for some assets and quietly costs you money for others. It makes sense for a let or commercial property (where there was never a primary-residence exclusion to lose, the company’s 21.6% CGT beats the trust’s 36%, and the entity makes co-ownership and growth easy), and for building a group of properties that you will hold long-term and reorganise over time.
It does not make sense for your primary residence or a single long-held personal investment: you would surrender the R3 million exclusion and the 18% individual CGT rate, add a 20% dividend layer on the way out, and walk into the residential-property-company transfer-duty trap on a later share sale.
Frequently asked questions
It depends on what the property is. A company beneath a trust suits a let or commercial property, or a structure you intend to grow into a group. It rarely suits your own home: a company gets no primary-residence exclusion and pays CGT at an effective 21.6%, where you personally would keep the R3 million exclusion and an 18% effective rate. See whether to move it in.
Rent is taxed in the company at 27%. On a later sale the capital gain is taxed at an effective 21.6% (80% inclusion × 27%), with no primary-residence exclusion. Passing the profit up to the trust as a dividend then triggers a further 20% dividends tax. The combined company-then-dividend cost is the price of the structure.
No. A company does not avoid CGT — it changes the rate and removes a relief. It pays CGT at an effective 21.6% (lower than a trust at 36%) but loses the R3 million primary-residence exclusion a natural person keeps. For a home you would usually pay more, not less.
Two main routes. A dividend (profit up to the trust) carries 20% dividends tax. A return of contributed tax capital — paying back what was originally subscribed for the shares — is not a dividend and is not subject to dividends tax, but it reduces base cost. This is why the share capital and loan account are structured carefully at the outset.
Because the law looks through the company. Where its assets are more than 50% residential property, it is a “residential property company”, and selling its shares is taxed as if you bought the property itself. See the transfer-duty rules and budget for the duty.