South Africa: Proposed amendments to application of “conduit principle” in relation to trust distributions
Amendments may have unintended consequences for non-South African trusts and beneficiaries.
Taxation Laws Amendment Bill (B30 – 2025, the TLAB) proposes to amend section 25B of the Income Tax Act No 58 of 1962, which codifies the “conduit principle” in relation to trust distributions, to clarify that the principle only applies to South African resident trust beneficiaries and donors—effective for tax years beginning on or after March 1, 2026.
However, the amendments will result in the conduit principle applying to both:
- Distributions by South African resident trusts to South African resident beneficiaries, and
Distributions by non-South African trusts to any beneficiaries (i.e., both South African and non-South African beneficiaries).
KPMG observation
Confirming the application of the conduit principle between non-South African tax resident trusts and beneficiaries may have an unintended impact regarding South African-sourced income, including:
- Difficulty in availability of double taxation relief under income tax treaties
- Administrative burdens for both foreign trustees and beneficiaries
Read a November 2025 report prepared by the KPMG member firm in South Africa