account are deemed as assets in their estate. The
value verified by the company’s accountant, together
with any amount owing by way of loan account, will
increase the value of their estate.
A Secondary Tax on Companies (STC) of 10%
is levied on all profits distributed in the form of
dividends.
Buying a property as a close corporation
Close corporations can continue to exist until deregistered, dissolved or converted into a private
company governed under the new Companies Act.
Close corporations face the same transfer duty, CGT
and tax implications as companies.
The only difference between buying in a close
corporation and a company, is that close corporations
are governed by the Close Corporations Act
69/1984. They are managed by members. Ownership
is restricted to a maximum of 10 natural persons.
There is no need to provide audited financials, which
substantially brings down the administration fees.
A trust can be registered as a member of a close
corporation.
Buying property as a trust
A trust is established by a founder or settlor, trustees
and beneficiaries. The founder will appoint trustees
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in terms of the Trust Deed who will manage the
affairs of the trust for the named beneficiaries.
A property held within a trust will not form a part
of an individual’s estate when they die, which means
that the estate will benefit from estate duty savings.
Since the trust is a separate legal entity, the property
held within the trust is protected from being attached
by creditors of the beneficiaries. This provides a safe
option to protect assets. Other benefits include no
executor fees when the owner dies. All repairs and
maintenance, as well as other bills such as water and
rates will be for the trust’s account.
Depending on the investment structure that is
used when purchasing a property and the varying tax
and legal implications that may be applicable, consult
your attorney or financial consultant before signing
an offer to purchase.
However, consider that, “The costs of running the
entity must be justifiable with the amounts made in
rent from those properties versus maintaining the
structure,” says Michael Bauer, Managing Director
of IHPC.
RESOURCES
RE/MAX, IHPC
Residential Handbook 2015
17