Page 40 - Nexia SAB&T Property & Tax Guide 2022

PURCHASING VIA LEGAL ENTITIES – PRO’S & CON’S
COMPANY
ADVANTAGES 6. Shareholders agreement can neatly regulate the
1. CC, trust, company can be shareholders relationship between the shareholders (subject
2. Strictly controlled by legislation to the MOI and Act)
Companies Act (71 of 2008) as amended 7. A bond may be registered subject to the
3. Can have more than 10 shareholders solvency and liquidity requirements of
4. Has greater image value than a CC or a Section 44
trust as a business vehicle
5. Relatively easy sale of interest through a DISADVANTAGES
sale of shares 1. The costs of annual audit (where applicable)
2. Complex legislation to comply with
CLOSE CORPORATION
ADVANTAGES DISADVANTAGES
1. Management is also represented by 1. Membership limited to 10
members who hold interest in the CC 2. Since 2011, no new CC’s may be registered
TRUST
ADVANTAGES 6. Trust deed can be set up so as to determine
1. The trust is treated as an entity separate the manner in which Trustee administers the
from the individuals fixed property and the Trustee is dutybound to
2. Assets don’t form part of the insolvent obey these wishes
estate in the event of sequestration
3. Strict controls – Trustees accountable to DISADVANTAGES
Master of the High Court 1. Cannot be sold as an entity
4. Special trusts formed for mentally ill or 2. The beneficiaries normally have discretionary
seriously disabled, will be allowed CGT rights which are not assets that can be sold
exemption if primary residence (and such as shares
meets other requirements to qualify) 3. Trustees cannot act until Letters of Authority
5. Special trusts – taxed at individual rates have been issued
Transferring property into a trust should be considered in light of recent tax law amendments – trusts
should no longer be created to simply limit taxes, but may still have other benefits. Each situation
should be considered on its own merits (with the aid of specialists in the field).
APPLICABLE TO ALL ENTITIES
ADVANTAGES DISADVANTAGES
1. Separate legal personality (CC’s and 1. CGT – where property is held in Company/CC,
Companies) ordinary trust, and special testamentary trust,
2. If shares held in trust, may protect the no primary residence exemption allowed
shares as long as not offered as security 2. Dividends tax levied on the shareholder at a rate
against a loan of 20% on the amount of any dividend paid by
3. Shares/Members interests can be sold a company (subject to certain exemptions). The
4. Continues to exist as an entity even in tax is to be withheld by the company paying the
event of death or resignation of member/ taxable dividends and paid across to SARS
shareholder/director/trustee 3. Transfer of members interest, shares – subject to
5. Need not be in existence at time of Securities Transfer Tax at a rate of 0.25% on the
signing agreement (CC’s and Companies) transfer of listed or unlisted securities