Offshore trusts and income tax avoidance: the lures and pitfalls from a South African perspective
by Annet Wanyana Oguttu
International Journal of Private Law (IJPL), Vol. 5, No. 4, 2012

Abstract: Taxpayers often form trusts out of their countries of residence in order to avoid income taxes in their countries. The ensuing tax avoidance is more apparent when trusts are set up in offshore tax-haven jurisdictions that levy nil or minimum taxes, if there are no counteracting measures by the taxpayer's country of residence. From a South African perspective, this article investigates the legality of some factors that lure taxpayers into investing in offshore trusts for tax avoidance purposes. The consequential income tax pitfalls that unwary taxpayers often fall into are then discussed. The analysis entails a discussion of effectiveness of the anti-tax avoidance legislation that South Africa has in place to counteract the ensuing tax avoidance, and it provides some recommendations as to how this legislation can be enhanced.

Online publication date: Sat, 20-Sep-2014

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