Page 46 - Nexia SAB&T Trust Guide 2022

an amount, calculated as the difference between the amount of interest
incurred by the trust (if any, otherwise nil) and the interest that would have
been incurred by that trust had the official rate of interest been charged on
the loan, will be a continuing, annual donation for purposes of donations tax,
made by the lender on the last day of the year of assessment of the trust

The following will be specifically excluded from the preceding 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.
■ loans to a qualifying employee share purchase trust.
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.
Loans by a natural person or a company to a company is also subject to donation
tax on the same basis if 20% or more of the shares of the company is held
directly or indirectly by a trust (or beneficiary of trust or spouse of beneficiary).
Preference shares issued by a company are also regarded as loans for this donation
tax calculation. As a result the continuous shareholding by trusts in operating
companies might have to reconsidered due to the potential negative consequences
of donation tax levied on interest-free and low-interest loans to these companies.

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