South Africa: Conduit principle does not apply when capital gains are realized by a trust

Constitutional Court judgment

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November 12, 2024

The Constitutional Court on October 2, 2024, held that the conduit principle, while relevant, does not apply when capital gains are realised by a trust. The provisions of the Income Tax Act (ITA) allow a trust that disposes of an asset to attribute any resultant capital gain to its beneficiary / beneficiaries. The trust was however not permitted to rely on the conduit principle to attribute the capital gain to its beneficiaries. Therefore, the trust was liable for the capital gains tax on gains realized from asset disposals.

The case is: The Thistle Trust v Commissioner for the South African Revenue Service [2024] ZACC 19. Read the judgment

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