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SARS May Close Down Dividend Unit Trusts

  02/11/10 06:56, by Len, Categories: Personal Financial Management, Retirement Planning, Tax Optimisation, Risk Management

Source: Article by Leani Wessels -

Johannesburg - The South African Revenue Service (Sars) may force some dividend income unit trusts to shut down.

This is according to Investec Asset Management deputy MD Thabo Khojane, who told journalists on Wednesday that Sars could act soon on the issue.
The Financial Services Board [FSB] issued a circular in January, informing asset management groups of the investigation and warning portfolio managers to prepare exit strategies should some funds be closed down.

"There are structures using covert instruments to convert interest income into dividend income," said Patrick Ward, the FSB's head of collective investments. Unlike interest income, dividend income is not taxed by Sars. Dividend income unit trusts hold about R54bn in assets. According to Ward, the investigation is in the hands of Sars. The underlying holdings of most dividend income unit trusts consist of preference shares and cash. However, Sars will be investigating those suspected of using underhanded instruments to avoid tax.

The FSB circular stated that "adverse tax consequences" could result from the outcome of the probe.

Sars was not immediately available to comment on the issue.

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