Taxation of trusts was extensively revised in the 1997 Budget with changes to Unit Trusts and introduction of Landowner Resource Trusts.

Unit Trusts

Unit trusts are broadly defined as trusts whose units are listed for sale on a stock exchange or widely offered for sale to the public. From 1 January 1997, unit trusts have been liable for tax on their net trusts are exempt from tax.

Other Trusts

The trust income is taxed at 30 per cent. This rate was adjusted downward in the 1993 Budget from 36.5 per cent.

Distribution by Other Trusts

Distributions to non-resident beneficiaries are subject to an additional final withholding tax of 10 per cent of the distribution which is payable by the trustee.

Resident beneficiaries are taxed again, at the marginal tax rate, on the net share of the trust income to which they are entitled, whether or not it has been distributed to them.

Generally, resident beneficiaries are not allowed a credit for tax paid by the trustee on the trust income.

Exception to this rule are:

• where a beneficiary is liable to pay tax on a present entitlement of a share of trust income which has not in fact been distributed to him, or;

• if the trust has been established by a Court, or by the Will of a deceased person.

In those cases, the beneficiary is entitled to a tax credit against this personal tax liability, equal to either his average tax on his trust income distribution or the proportionate tax paid by the trustee, whichever is the lesser. Resident beneficiaries actually receiving this income are taxed on the net amount received.