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ABC of Section 7C and the Tax Implications - pkf. co. za Essentially, the foregone interest is treated as a deemed donation and subject to Donations Tax The deemed donation is calculated annually in relation to each year of assessment that the loan balance remains outstanding by the trust or company
Deemed Donations Tax - An Administrative Nightmare The difference between the actual rate and the official rate (provided the loan bears interest at a rate lower than the official rate - currently 7 75%), will be deemed to be a donation to the trust and taxed at 20% (twenty percent) in the hands of the connected person
TRUSTS AND DONATIONS TAX: DON’T GET TANGLED UP IN THE SNAGS Section 7C stipulates that any difference in the official interest rate and the interest rate charged on the loan – is seen as a deemed donation Deemed donation = (Official interest %) – (Interest % charged on the loan) Example: You transfer R2,8 million to your family trust subject to 0% interest
Section 7C – a practical explanation - bdk Auditors Section 7C deems the interest that is not levied or charged on an interest-free loan, as a deemed donation on the last day of each tax year for a loan that was outstanding for any period during that preceding tax year
Donations Tax | South African Revenue Service - SARS From 1 March 2018, donations tax is levied at a rate of 20% on the aggregated value of property donated not exceeding R30 million, and at a rate of 25% on the value exceeding R30 million (section 64 (1))
Introduction Trust Structures and anti-avoidance: Section 7C deemed . . . — The loan, advance or credit is provided interest free or a rate that is lower than the official rate of interest Should the above be met, there is a deemed annual donation of the amount of interest below the official rate of interest, in terms of which donations tax at 20% 25% may be due to SARS
SARS, The Tax Faculty, SARS v Brummeria Renaissance, SARS v Woulidge . . . The donation is deemed to become effective on 28 February 29 February and donations tax is consequently payable on 31 March Consider the following example: Mr Donor sold a rent-producing property to a trust of which one of his children is a beneficiary
Viewpoints: New deemed donation: section 57B of the Income Tax Act The new deemed donation applies to the transfer (ie disposal) of the right to receive an asset in exchange for services rendered or to be performed (section 57B) Section 57B is implemented as an anti-avoidance measure commencing on 1 March 2022 A deemed donation must be considered in addition to actual donations
Interest free loans and trusts - The tax implications for donors - GoLegal Briefly, section 7C seeks to levy donations tax on loans owing by trusts to connected parties (typically beneficiaries or the companies they control) To the extent that interest is not charged, a donation is deemed to be made by the creditor annually amounting to the difference between the interest actually charged (if at all), and interest
DONATIONS TAX AND ESTATE PLANNING - Schindlers Attorneys Donations tax is levied by SARS at the rate of 20% of the value of property donated Donations made by non-residents are not subject to South African donations tax but may be liable in the country of their origin Donations between spouses are exempt from donations tax