The Changing Dynamic of Trusts



Madhvi Bokhoree Bootun

The concept of the trust has been around longer than most people realize. As the story goes, the very first trust dates back to the days of the Roman Empire –about 800 A.D. In that society, only citizens of Rome could own property. When faced with deployment, soldiers would transfer ownership of their property to a trusted friend to make sure their families were cared for. During the Roman occupation of the British Isles, the trust became a familiar tool to protect lands from rogue governors and lords.

The concept of the trust since then has been introduced in various jurisdictions and has evolved enormously. Trusts were once regarded only as a tool available to the ultra-wealthy. While this was true for many decades, there has been a proliferation of use of these flexible and powerful planning tools. People have discovered that trusts can be useful for almost any socioeconomic class.


A trust generally involves three parties (Fig 1); the settlor or grantor (the original owner of the assets) sets up the trusts and commits to formally gifting certain assets into the trust. The trustees assume the job of managing and overseeing the trust assets, they do this for the benefit of the current and often future beneficiaries. The trustees have a fiduciary relationship with the beneficiaries, meaning they are obliged to put the beneficiaries’ interests above their own. They are also the legal owners of the assets in the trust.

Trusts allow for flexibility and control over where, when and under what conditions someone’s assets are used to provide a benefit to someone else. A case study is being provided to demonstrate use of Trust in Mauritius and how it is beneficial for asset protection/family succession.

A case study is being provided to demonstrate use of Trust in Mauritius and how it is beneficial for asset protection/family succession.


A South African resident (Mr. Z) intends to expand his current SA trading business to other international markets. He sources the products from various locations in Asia and will trade in promising markets such as Ghana, Cote D’Ivoire and some other sub Sahara countries. He is concerned about undertaking the international trading activities from a South African base given the constraints of exchange control, availability of finance and taxation.

It may be possible for the South African resident to settle a Trust in Mauritius of which himself and members of his family are the beneficiaries.

The Trust can be set up with minimum Capital. In case there is a requirement for working capital, this amount could be loaned by the South African resident to the Trust with interest at the relevant LIBOR rate plus 1%.

The Trust can then set up a trading Company in Mauritius as a GBL Company. The trading Company will have an independent Board (which can include the South African resident) which will make the decisions on behalf of the Company.

The operations of the GBL company will be managed independently in Mauritius. All the paperwork regarding the trading activities will be done in Mauritius.

Both the Trust and the Company are now operating in an Exchange Control Free environment where the tax liability to the structure remains competitive. The South African resident and his family members will benefit as discretionary beneficiaries of the Trust.

Since the GBL company will be engaged in international trading activity, without the goods being landed in Mauritius, it will be subject to tax in Mauritius at the rate of 3% of its net trading income. The Trust will be considered as a non-resident trust as long as its Settlor is not resident in Mauritius at the time the instrument creating the Trust is executed or at such time as the Settlor adds new property to the Trust and /or its beneficiaries are not resident in Mauritius. The a non-resident trust, it will be liable to tax only on its chargeable income attributable to its Mauritian source income at the rate of 15% but, may claim partial exemption of 80% on specific income e.g. foreign dividend and interest income, subject to satisfying the conditions prescribed relating to substance of its activities. The Trust will need to submit an annual return of income to the Mauritius Revenue Authority and declare its country of tax residence in the return.

In South Africa, the GBL Company will not be classified as a controlled foreign company if the Trust is fully discretionary and irrevocable and provided that the shares in the GBL* company is not vested in South African residents. The income of the GBL company will, accordingly, not be subject to income tax in South Africa, provided that such income is not derived from a South African-source. The dividends declared by the GBL company will not be subject to South African income tax in the hands of the Trust. If the dividends are vested in a South African resident beneficiary during the same year of assessment as in which it was received by or accrued to the Trust, then such dividends will be subject to South African income tax in the South African resident beneficiary’s hands at an effective rate of 20%. However, if the dividends are only vested in the South African resident beneficiary during the following year of assessment, then the beneficiary will receive such dividends free of any South African income tax. The Trust can potentially mitigate the imposition of South African estate duty on shares in the GBL* Company.

Disclaimer: The above is for information purposes only. It is not a substitute for formal advice, and we strictly recommend that you engage the services of a registered South African Tax Practitioner for advice.


  • Stable and well regulated jurisdiction. Trusts Act 2001 follows UK and other Commonwealth countrieslegislations
  • All Trusts in Mauritius require a qualified Trustee which is duly regulated, hence ensuring a good management of the Trusts
  • Confidentiality – a Trustee is required under the Act to keep confidential all information pertaining the Trust except in legal matters involving money laundering, terrorism financing, corruption etc
  • Trusts provide the benefits of asset protection and family succession
  • Trusts established in other jurisdiction may migrate to Mauritius simply by allowing the Trust to be governed under Mauritius laws and by appointing a qualified Trustee in Mauritius
  • No forced heirship rules
  • A Trust may appoint protectors if wish so
  • Trust property may include any type of asset, including cash, securities, real estate, or life insurance policies.
  • Trusts may be used for charitable and non-charitable purpose