South Africans have been liable for capital gains tax since 2001 as part of their income tax when disposing of an asset which results in a gain.
There's a perception that this form of tax can be avoided by people with the funds to start a trust or a charitable foundation.
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Certified financial planner Paul Roelofse says capital gains tax can be avoided in certain instances, but care has to be taken with the structuring of such an entity.
There are various terms and conditions that apply, but in general you can't avoid paying tax if you make a gain on an asset.— Paul Roelofse, Certified financial planner
Capital gains tax in a trust is becoming pretty expensive.— Paul Roelofse, Certified financial planner
Roelofse cautions that if a client decides one day to sell the asset within a trust, there aren't the same exclusions or rebates that would apply to an individual.
Your rate of tax is going to be far higher than if it was in your own hands, so you also have to do a very careful calculation around that before you enter into that entity.— Paul Roelofse, Certified financial planner
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This article first appeared on CapeTalk : Trusts and capital gains tax