The headline rates: 45% income, 36% CGT
A trust is the harshest taxpayer in the system. A trust that keeps income is taxed at a flat 45% — there is no sliding scale and no rebate, so the very first rand of retained income is taxed at the top marginal rate. On capital gains, an ordinary trust pays an effective 36%: the Eighth Schedule applies an 80% inclusion rate to a trust’s gain, and 80% × 45% = 36%.
Beware a common error. The 18% figure you may have seen is the top individual effective CGT rate (a 40% inclusion at 45%), not a trust rate. A company sits between the two at 21.6% (27% × 80%). The SARS Capital Gains Tax rate table sets out the effective rates:
Individuals and Special Trusts 18%; Companies 21.6%; Other Trusts 36%.
Note — [The 18% individual rate and the 36% trust rate are unchanged and current. An older SARS guide quoted 22,4% for companies; that predates the 2023 reduction of the company income-tax rate to 27% — the current company effective CGT rate is 21.6% (27% × 80%).]
This is precisely why these structures lean so heavily on the conduit principle below: rather than have rent or a gain taxed in the trust at 45% / 36%, it is vested in beneficiaries in the same year so it is taxed in their hands, often far more gently. The full schedule of figures sits on the 2026 trust tax rates page, and the trade-off against a company is compared on trust vs 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.
The conduit principle for income (section 25B)
A trust is treated as a conduit — a pipe — rather than a final taxpayer. Income it receives and then vests in a resident beneficiary in the same year is taxed in that beneficiary’s hands, not the trust’s. Only what stays in the trust is taxed in the trust. The amount also keeps its nature on the way through: rent stays rent, interest stays interest.
Any amount … received by or accrued to … any person … in his or her capacity as the trustee of a trust, shall, subject to the provisions of section 7, to the extent to which that amount has been derived for the immediate or future benefit of any ascertained beneficiary, who is a resident and has a vested right to that amount during that year, be deemed to be an amount which has accrued to that beneficiary, and to the extent to which that amount is not so derived, be deemed to be an amount which has accrued to that trust.
Read the two halves. To the extent the amount is derived for an ascertained, resident, vested beneficiary, it is deemed to accrue to that beneficiary. To the extent it is not so derived — anything the trustees retain — it is deemed to accrue to the trust, where the flat 45% applies. The opening words “subject to the provisions of section 7” are the hinge to the attribution rules: even a textbook conduit can be overridden and pushed back onto the founder.
The attribution rules bite hardest where the beneficiaries are minor children — under 18 (the age of majority is 18: Children’s Act 38 of 2005, s 17). Where income reaches a child because of a donation, settlement or other disposition by the parent, section 7(3) deems it to be the parent’s income instead, so vesting in a young child usually does not achieve the hoped-for rate saving. That mechanism is set out in full on minor children and attribution.
The conduit principle for capital gains (paragraph 80)
Capital gains have their own conduit rule in the Eighth Schedule. If the trust vests an asset (or the gain on it) in a resident beneficiary, the gain is taxed in the beneficiary’s hands — at that person’s rates, with an 18% effective ceiling for a top-bracket individual — and is disregarded in the trust:
(1) Subject to paragraphs 68, 69 and 71, where a trust vests an asset in a beneficiary … who is a resident, and determines a capital gain in respect of that disposal … (a) that capital gain must be disregarded for the purpose of calculating the … capital gain or … loss of the trust; and (b) that capital gain … must be taken into account … [for] the beneficiary to whom that asset was so disposed of. (2) … where a trust determines a capital gain in respect of the disposal of an asset in a year of assessment during which a beneficiary … who is a resident has a vested right or acquires a vested right (including a right created by the exercise of a discretion) to an amount derived from that capital gain … (a) [it is disregarded in the trust]; and (b) [it is] taken into account as a capital gain … of that beneficiary.
Two things matter. First, paragraph 80 is expressly “subject to paragraphs 68, 69 and 71” — the attribution rules — so a gain vested in a minor child can be redirected to the parent under paragraph 69 just as income is under section 7(3). Second, paragraph 80 governs the flow-through exhaustively: the Constitutional Court has held that you cannot fall back on an open-ended common-law conduit to stack a gain through a chain of trusts. That is the lesson of the Thistle Trust case, summarised below.
A practical point on rate: when a gain is vested in a top-bracket individual it is taxed at the 18% effective rate, half the trust’s 36%. That difference — not income tax today — is the real engine of the planning.
The non-resident beneficiary trap
The income conduit only works for a resident beneficiary. This is a relatively recent and easily missed change: since 1 March 2024 the words in section 25B(1) require the vested beneficiary to be a resident before income flows through. Income vested in a non-resident beneficiary no longer enjoys conduit treatment — it is taxed in the trust at the flat 45%, regardless of the vesting.
Getting cash out of the company: dividends tax
In the classic structure the trust owns the shares in a company (Newco) that owns the property. Rent received by Newco is taxed in Newco at 27%. When Newco then passes profits up to the trust as a dividend, a separate dividends tax of 20% is withheld on the distribution. The income conduit does not switch this off — dividends tax is a largely final tax on the act of distributing, not something the trust can flow away.
The practical effect is two layers on company profit before it reaches the family: 27% company tax, then 20% dividends tax on what is paid up. That is one reason the share-and-loan structure is set up carefully at the outset — a return of contributed tax capital (share capital) is treated differently from a dividend and is not subject to dividends tax, so the loan account can often return value more cheaply than a dividend can. How that loan account is funded, and the section 7C cost of leaving it interest-free, is covered on section 7C loans.
A final warning for layered structures. The conduit for capital gains does not let you stack a gain through multiple trusts to reach a low-rate beneficiary at the bottom — paragraph 80 governs, and the Constitutional Court rejected the multi-trust flow-through argument:
Frequently asked questions
An ordinary trust that keeps income is taxed at a flat 45% and pays CGT at an effective 36% (80% inclusion × 45%). To avoid that, family trusts rely on the conduit principle: income and gains are vested in resident beneficiaries in the same year so the tax flows to them, often at lower rates. A special trust is taxed on the individual scale instead.
The flat trust income rate is 45% — no sliding scale, no rebate, so the first rand of retained income is taxed at the top rate. The effective CGT rate for an ordinary trust is 36%. A special trust is the exception — it is taxed on the individual sliding scale (CGT capped at an 18% effective ceiling). See the 2026 rates.
It treats the trust as a pipe, not a final taxpayer. Where the trust vests income (s 25B) or a capital gain (para 80 of the Eighth Schedule) in a resident beneficiary in the same year, that amount keeps its nature and is taxed in the beneficiary’s hands. Only what stays in the trust is taxed there — at 45%, or 36% on gains.
For an ordinary trust it is 36%, not 18%. The 18% figure is the top individual rate (40% inclusion × 45%). A trust has an 80% inclusion rate, which at 45% gives 36%. The 18% rate only reaches a beneficiary through the conduit — when the gain is vested in that person. A special trust is on the individual scale, so its CGT ceiling is 18%.
Yes, but usually only once. Under the conduit the income or gain is taxed in the resident beneficiary’s hands in the year it is vested — keeping its nature (rent stays rent, a gain stays a gain) — and is disregarded in the trust. A later payout of an already-taxed amount is not taxed again. The attribution rules can override this and tax the founder instead.
Since 1 March 2024, section 25B(1) only flows income through to a beneficiary who is a resident with a vested right. Income vested in a non-resident no longer gets conduit treatment and is taxed in the trust at 45%. If a beneficiary lives abroad, the flow-through will not work for them and the trust carries the tax.