Page 583 - SAIT Compendium 2016 Volume2

IN 67 (2) Income Tax acT: InTeRPReTaTIon noTes IN 67 (2)
3.1.3 A trust (other than a portfolio of a collective investment scheme in securities or a portfolio of a collective investment scheme in property) of which the natural person or relative is a bene ciary [paragraph (a)(ii)]
A trust is a connected person in relation to a natural person if the natural person, or a relative of the natural person, is a bene ciary of the trust. A ‘trust’ is de ned in section 1(1) as follows:
A ‘bene ciary’ is de ned in section 1(1) as follows:
The authors of Income Tax in South Africa comment as follows on this de nition:*
‘This de nition is wide and includes capital and income bene ciaries with vested rights and discretionary bene ciaries,
provided that these have been designated as such, irrespective of whether or not they have ever been in receipt of any distributions or have formally accepted bene ts. The same would apply to members (named or unnamed) of a designated class of persons and where the class is speci ed as being a collection of persons from whom bene ciaries may be chosen by the trustees, even where this choice has not been made in respect of a particular person.’
SARS is in agreement with the authors’ comments on the de nition of a bene ciary.
‘[T]rust’ means any trust fund consisting of cash or other assets which are administered and controlled by a person acting in a duciary capacity, where such person is appointed under a deed of trust or by agreement or under the will of a deceased person;
‘[B]ene ciary’ in relation to a trust means a person who has a vested or contingent interest in all or a portion of the receipts or accruals or the assets of that trust;
Example 5 – Connected person in relation to a natural person
Facts:
B, who is the spouse of A, is a bene ciary of AB Family Trust. Is AB Family Trust a connected person in relation to A?
Result:
AB Family Trust is a connected person in relation to A under paragraph (a)(ii) because B is a bene ciary of AB Family Trust and a relative of A.
Example 6 – Connected person in relation to a natural person
Facts:
D is the founder of ABC Family Trust. D’s three grandchildren, A, B and C were named as bene ciaries of the trust. Is ABC Family Trust a connected person in relation to D?
Result:
A, B and C are related to D in the second degree of consanguinity and they are bene ciaries of ABC Family Trust. ABC Family Trust is therefore a connected person in relation to D under paragraph (a)(ii).
3.2 Connected person in relation to a trust (other than a portfolio of a collective investment scheme in securities or a portfolio of a collective investment scheme in property)
3.2.1 Paragraph (b) Connected person means –
3.2.2 A bene ciary of the trust [paragraph (b)(i)]
A bene ciary of a trust is a connected person in relation to the trust (see 3.1.3 on the meaning of a ‘bene ciary’).
3.2.3 A connected person in relation to the bene ciary of the trust [paragraph (b)(ii)]
A person, who is a connected person in relation to a bene ciary of a trust, is also a connected person in relation to the trust.
Example 7 – Connected person in relation to a trust
Facts:
C is the founder of A Family Trust of which B Family Trust is the only bene ciary. The bene ciaries of B Family Trust are C, C’s son D and stepchild E. Are C, D and E connected persons in relation to A Family Trust?
* D Clegg and R Stretch Income Tax in South Africa [electronic version – last updated April 2013] LexisNexis Butterworths in 24.1.1.
† The de nition of a ‘connected person’ was amended with effect from the commencement of years of assessment commencing on or after 1 January 2010, to exclude a portfolio of a collective investment scheme in securities and a portfolio of a collective investment scheme in property from a trust.
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(b) in relation to a trust (other than a portfolio of a collective investment scheme in securities or a portfolio of a collective investment scheme in property)—†
(i) any bene ciary of such trust; and
(ii) any connected person in relation to such bene ciary;