Proposed unit trust rules a step towards reducing ‘tax risks’

The collective investment scheme (CIS) industry held R3.4 trillion in assets under management at the end of the second quarter of last year.

- Amanda Visser

This equates to almost half of the country's gross domestic product (GDP).

The National Treasury has now published a "long-awaited" discussion document on the taxation of these savings vehicles, stating that any changes to the CIS tax regime must align with efforts to encourage more savings.

However, the principles of a fair tax system will also be retained. South Africa's savings rate is 13.6% of GDP, according to 2023 World Bank development indicators.

The rate remains concerning, particularly when considering the efforts already put into encouraging savings through policy adjustments.

The Treasury committed itself in 2020 to review the income tax treatment of amounts received by these schemes' portfolios. The discussion document offers several proposals on how tax certainty can be achieved for CIS portfolios.

Income vs capital