29 Sep Buying Property In a Trust or Company: Pros, Cons and the Process
When you’re considering purchasing immovable property in South Africa, one important decision is the vehicle through which you hold the property: in your personal name, via a company, or via a trust. Each route carries different implications, especially for tax, estate planning, liability, and compliance. This article explores the pros, cons and process of buying property in a trust or company in South Africa.
Why Consider a Company or Trust?
Holding property through an entity (a company or a trust) rather than personally can offer advantages such as asset protection, estate planning flexibility, and sometimes tax benefits. At the same time, there are trade-offs: higher administrative costs, challenges with compliance, potentially higher tax rates, and loss of certain personal benefits.
In South Africa, for example:
- When you hold property personally as your primary residence, you benefit from the primary-residence exemption from the South African Revenue Service’s Capital Gains Tax (CGT) rules: up to R2 million of gain may be excluded.
- Trusts are taxed at high rates: income retained in a trust is taxed at 45% (for the 2024/2025 year) and When a trust sells an asset and makes a profit, 80% of that profit is taxed at the trust’s 45% tax rate, which means the trust effectively pays about 36% tax on the capital gain.
- According to Global Property Guide, holding through a company may offer a flat corporate tax rate (for example 27% for companies), which in some cases may be lower than high individual tax brackets.
- Estate duty applies to the estate of a person on death (20% for the first R30 million, 25% after that), which influences estate-planning decisions and the structures used.
So the question is: Which structure suits you best? It depends on your objectives: long‐term investment, living in the property, estate planning, creditor risk, tax optimisation, etc.
Ownership Via a Trust
What Does It Mean?
A trust (typically a “living” or inter vivos trust) is an entity where a founder (or donor) appoints trustees to hold assets for the benefit of beneficiaries. If a trust holds the property, then the trustees are registered as the owners (on the title), and beneficiaries hold beneficial interests under the trust deed.
Pros
- Asset protection: The asset is legally held by the trust, which may help shield it from the personal creditors of the founder (depending on how the trust is structured). For those with business risk or surety obligations, this can be appealing.
- Estate planning flexibility: On the death of the founder, property held by the trust may avoid being directly in the deceased’s estate, and beneficiaries can receive distributions according to the trust deed, avoiding many direct transfers of real property. This can help with continuity of ownership and may mitigate delays or disputes in the estate.
- Succession simplicity (share transfers vs property transfers): Although more relevant for companies, trusts also allow for easier movement of beneficial interests rather than transferring the property itself.
Cons
- Higher tax rates: As noted, trusts pay 45% tax on retained income and 36% on capital gains (for “other” trusts). That is substantially higher than the tax on individuals in many cases.
- Loss of personal primary residence CGT exemption: If you hold a property via a trust, you typically cannot rely on the R2 million primary-residence exclusion for CGT.
- Complex compliance: Trusts must comply with many tax and regulatory requirements (tax returns for the trust, distributions to beneficiaries, possible donations tax if the founder donates the property, and transfer duty implications).
- Financing constraints: Banks may impose stricter lending criteria when a trust is involved (higher interest rates or larger deposits) because of perceived higher risk or more complex structure. Some sources say that purchasing in your own name may give easier access to 100% home loans.
Key Tax And Compliance Issues For Trusts
- Income tax: Trusts are taxed as separate entities; a trust retaining income pays tax at 45% (2024/25).
- Capital Gains Tax (CGT): For trusts, “other trusts” pay an effective 36% on capital gains (80% inclusion rate × tax rate) while companies pay 21.6% (80% inclusion) and individuals pay 18% (40% inclusion).
- Transfer duty: Transferring a property into a trust may trigger transfer duty, CGT, and possibly donations tax if the property is donated rather than sold at market value.
- Estate duty: Keeping property in a trust may remove the asset from the deceased’s estate, reducing exposure to estate duty. However, loans from the founder to the trust or inadequate structuring might undermine that benefit.
Ownership via a Company
What Does it Mean?
Here, a company (for example, a private company purchases and holds the property as its asset. You hold shares in the company rather than owning the property directly (if you are the shareholder). The company is subject to corporate tax and the rules applicable to companies.
Pros
- Flat corporate tax rate: Companies are taxed at a set rate (around 27% for 2025), which may be lower than a high‐income individual’s marginal rate (up to 45%).
- Estate planning ease via share transfers: Instead of transferring the property itself, you can transfer shares in the company, potentially simplifying the process on death or sale, and possibly avoiding transfer duty on the property itself.
- Liability separation: The company structure provides a degree of separation between you personally and the property asset (depending on guarantees given to lenders, etc.).
Cons
- No primary residence CGT exclusion: If the company holds your “home,” it does not qualify for the R2 million exclusion on disposal.
- Shareholder tax when distributing profits: If the company holds the property, rental profits or sale gains may be taxed at the corporate rate, and then taxed further when distributed as dividends to you.
- Cost and administration: Incorporation, annual filings, audits or review, and company governance raise costs and complexity.
- Financing challenges: Property companies may face higher interest rates or require higher equity/deposits for bond finance than individuals.
- Estate duty and exit tax: On the disposal or transfer of shares, CGT may apply. If the company is held by an estate, then estate duty considerations for share transfers may apply.
Key Tax and Compliance Issues for Companies
- Income/rental profits: A company’s taxable income is taxed at the corporate tax rate (27% for 2025) in South Africa, according to Global Property Guide.
- CGT for companies: 21.6% of capital gain is included (80% inclusion × tax rate) for companies disposing of property according to the South African Revenue Service.
- Transfer duty: If property is transferred into a company from individuals, transfer duty may apply at the time of transfer.
- Estate planning: Shares in a company can be part of estate planning, but care is needed regarding how the shareholding is held, valuations on death, and potential estate duty.
- BBBEE and property finance: Additional regulatory or financing considerations may apply to companies, particularly in property investment.
Process: Buying Property Via a Trust or Company
Here is a high-level process that applies broadly, with additional considerations where an entity (trust or company) is used:
-
Establish the Entity
- If you choose a trust, you must draft a trust deed, appoint trustees, register the trust with SARS for tax (ITR12T), and ensure compliance.
- If you choose a company, incorporate the company, register with SARS, open bank accounts, and create a shareholders’ agreement if needed.
- Decide whether the property will be an investment property (rental) or a primary residence.
-
Finance and Acquisition Planning
- For a trust/company, check with banks for bond finance: some lenders may lend directly to the entity, others may require personal guarantees or higher deposits.
- Budget for transfer duty, conveyancing fees, registration costs, and municipal clearances.
- Check the compliance of the property: municipal rates, zoning, leasing (if applicable), VAT status (if commercial property), etc.
-
Offer to Purchase / Sale Agreement
- The entity (trust or company) must be the purchaser (if acquiring in its name). Ensure the seller is aware and the offer reflects that.
- Consider including clauses about entity ownership, loan accounts (if the founder injects funds into the trust/company), and distribution mechanics (in a trust).
- If the founder is injecting the property into a trust or transferring within a company structure, consider the tax consequences (donation, transfer duty, CGT) carefully.
-
Registration and Transfer
- A conveyancer prepares documentation: trust/company registration documents, FICA, and power of attorney if trustees/shareholders need to act.
- The Deeds Office registers the property in the entity’s name.
- Pay all taxes and duties, including transfer duty if applicable.
- If financing, bond registration must be done by the bank.
- For trusts: once the property is in trust, ensure the trust complies with tax (ITR12T), distributions to beneficiaries, and record‐keeping.
- For companies: ensure annual returns, tax filings, and company secretarial compliance.
-
Ongoing Management
- Trust: annual accounting, trustee meetings, beneficiary resolutions, distribution schedules.
- Company: directors’ meetings, shareholders’ meetings, dividends (if rental income), corporate tax, and CGT compliance.
- Both: property rates, maintenance, compliance certificates, insurance, and compliance with municipal and other obligations.
-
Exit or Succession Planning
- If you wish to transfer the property later, or on the death of the founder/shareholder, consider CGT, estate duty, and potential transfer duty again (depending on structure).
- For trusts: ensure the trust deed allows vesting of assets, distributions, and flow-through of tax implications (e.g., attributing capital gains to beneficiaries).
- For companies: succession by share transfer may offer efficiencies, but valuations and tax implications still apply.
Decision Matrix: When to Use What Structure
| Objective | Trust | Company | Hold in Personal Name |
| Primary residence, living in it | Usually not ideal, may lose R2 m CGT exclusion. | Also not ideal, same exclusion lost. | Usually best for owner‐occupiers. |
| Long-term investment (rental) | Useful if you want asset protection & estate planning more than maximum tax efficiency. | Strong if a business/investment vehicle, wants share transfers, dividend optimisation. | Simple but may expose personal estate and pool all risk in you. |
| Estate planning and succession control | Excellent: trust holds assets, allows distributions. | Good: company shares transferred, simpler than property transfer. | Standard: asset passes via estate, with estate duty implications. |
| Tax minimisation (rental income + CGT) | Less tax‐efficient: 45% on retained income, 36% on CGT. | Potentially better tax efficiency: 27% company tax + dividend tax when distributing. | Depends on the individual tax bracket (<45%). |
| Creditor/contractor exposure (you are a business owner with high risk) | Good asset protection. | Good separation. | Worst: personal exposure. |
When Neither Structure is Ideal
- If your property is your own home, you benefit from the primary residence CGT exclusion (R2 million) and other rebates; holding in a trust or company often means you lose that.
- If the property market is very short‐term (buy & sell quickly), and the added cost/time of an entity outweighs the benefits.
Practical Tips Before You Proceed
- Get specialist advice: Tax law around trusts and companies (especially property) is complex. A qualified tax attorney or property specialist can model your specific numbers.
- Review your trust deed or company shareholders’ agreement: Ensure that the trust deed allows distributions or vesting of capital gains to beneficiaries (important for effective CGT strategy).
- Check financing options: Speak with lenders early about bond credit for your chosen entity.
- Check transfer duty implications: If transferring property into a trust or company from yourself, you may trigger transfer duty or CGT.
- Understand the flow-through principle: For trusts, if managed correctly, the trust can vest gains to beneficiaries who then tax those gains at lower individual rates rather than high trust rates.
- Ensure compliance: Entities must file returns, keep minutes, and meet disclosure obligations (especially trusts).
- Estate duty and succession planning: Holding via an entity may reduce estate duty exposure, but only if structured properly (loans, funding, beneficial interest all matter).
- Regular review: Tax rates change (for example, corporate tax, CGT inclusion rates) so your structure should be reviewed periodically.
In conclusion, choosing to purchase property via a trust or company in South Africa can deliver significant benefits, especially from an estate planning, liability, and investment perspective. But it is not a decision to take lightly: tax burdens may be higher, and you’ll incur extra compliance and administration. Whether the structure is “better” depends on your goals, income level, risk profile, and holding duration. Before committing to a purchase, book a consultation with AWD Law, a property law specialist.
Kindly be advised that AWD Law does not enter into litigation on behalf of clients. Our conveyancers specialise exclusively in the development of vacant land, property transfers, bond registrations, administration of deceased estates and notarial practice. Should you require assistance with a litigation, kindly contact The Legal Practice Council.
Contact AWD Law For Professional Property Advice before signing your Offer to Purchase.
All fields marked by an asterisk are required for form submission.