Question: My client is a non-resident for tax purposes and received a distribution – capital gains – from a will trust. We want to know whether to include it in his local tax return, seeing as he already incurred other capital gains tax this year.

Answer: The capital gain, in this instance (i.e. a will or mortis causa trust), is dealt with in terms of paragraph 80(2) of the Eighth Schedule to the Income Tax Act (and when vesting takes place). It only refers to a resident and will therefore not attribute the capital gain to the beneficiary who is not a resident of the RSA. SARS discusses this in detail in its CGT guide – page 541 and onwards. Its first statement is as follows:

The default position is that a trust must account for any capital gain or loss that arises when it disposes of an asset. As discussed in 14.11.1, paragraph 80 provides an exception to the default position by attributing a capital gain from the trust in which it arises to a resident beneficiary. No mention is made in paragraph 80(1) and (2) of a non-resident beneficiary, and so no attribution to such a person is possible.

Contact the Tax Consultant Fanus Jonck with your tax queries (tax@jonck.net).