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Introduction

The taxation of trusts is based on the personal tax regime. Trusts are subject to the same taxes as individuals: income tax, capital gains tax and inheritance tax. However, the application of those taxes varies according to the status and terms of the trust. The determining factor is most commonly the entitlement of the beneficiaries. Other relevant factors are the date of commencement of the trust, the age of the beneficiaries and whether it was created during lifetime or on death. Therefore, the first step in working out how a trust is to be taxed is to examine the trust document to assess what type of trust it is.

Beneficiaries’ entitlement

Trust property is held by trustees for the benefit of beneficiaries. The beneficiaries’ rights to the property are set out in the trust document or established by law. A trust fund comprises:

1. •

   capital (consisting of the original property transferred