Unit trusts are taxed in a different way from other investments. They are taxed as a trust fund, which means that the tax is levied on the trustee (the company managing the unit trust) and not on the investor. The tax is levied at a flat rate of 20% and it does not matter whether you make money or lose money on the investment – you still pay 20% of your initial investment.
How is income from a unit trust taxed?
Income from a unit trust is taxed as income from savings and investments. The difference between the income from a unit trust and the income from savings and investment is that with a unit trust, you are buying units in the trust, while with savings and investment, you are buying shares in companies. Investors pay capital gains tax on any profits or dividends they receive.
Is the capital of a trust taxable in South Africa?
The South African Income Tax Act defines the meaning of “capital” as the aggregate amount of all the assets of a person. In terms of the definition, capital is not taxable in South Africa.
What are unit trusts in South Africa?
Unit trusts are a type of collective investment scheme that can be set up in South Africa. It is similar to a mutual fund but instead of being traded on the stock exchange; they are traded on the JSE. Unit trusts have been around for many years and many investors use them to diversify their investment portfolios.
