Page 41 - Robin Twaddle PTG 2017 Digital

The following will be specifically excluded from the above donation provisions:
◆◆ special trusts that are created solely for the benefit of disabled persons
◆◆ trusts that fall under public benefit organisations
◆◆ vesting trusts (in respect of which the vesting rights and contributions of the

beneficiaries are clearly established)
◆◆ loans used by the trusts to fund the acquisition of a primary residence
◆◆ loans that constitute affected transactions and are subject to transfer pricing provisions
◆◆ loans provided to the trust in terms of a sharia-compliant financing arrangement, or
◆◆ loans that are subject to dividends tax

The lender may utilise the annual donations tax exemption of R100 000 (or remaining
portion if applicable) against this deemed donation.

No deduction, loss, allowance or capital loss may be claimed in respect of the reduction,
waiver or other disposal of such a loan, advance or credit by the lender and will thus have
no tax benefit for the lender.

OTHER ANTI-AVOIDANCE PROVISIONS
Anti-avoidance provisions exist to combat the use of trusts for income splitting and tax
avoidance schemes. These provisions will normally be applicable where income accrues
to a person other than the donor as a result of a donation, settlement or other disposition
made (i.e. interest free loans). These provisions may apply where income accrues to the
following persons:
◆◆ The donor’s spouse;
◆◆ A minor child of the donor;
◆◆ The trust to whom the donation, settlement or other disposition has been made;
◆◆ Non-residents.

The result of the anti-avoidance provisions are that the income that accrues to the person’s
mentioned above are deemed to be the income of the donor.

The official rate of interest is defined in Paragraph 1 of the Seventh Schedule of the Income
Tax Act and is currently 8%.

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