Tax Court: CGT Stays in SA When a Trust Moves Offshore
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SARS Tax Court IT 46306 (IT) [2026] ZATC CPT (13 April 2026)
A trust sells shares worth almost R1.87 billion. Three days later, it changes its tax residence from South Africa to Namibia.
When the South African tax return is eventually submitted, no capital gain is declared and no section 9H deemed disposal is reported. SARS disagreed.
The Tax Court has now confirmed the additional assessment, including approximately R241.8 million in capital gains tax, a R24.2 million understatement penalty, a R38.7 million provisional tax penalty and R79.1 million in section 89quat interest, plus costs.
The case is a powerful reminder that the date on which a transaction accrues for tax purposes may be very different from the date on which cash is received.
What happened?
On 10 July 2017, the taxpayer entered into a Forward Sale Agreement (FSA) with T Investments. It disposed of its entire share portfolio and certain claims for: R1,873,255,799.31.
The agreement had no suspensive condition. Ownership would transfer on a future date determined by the purchaser, with payment at that time.
On 12 July 2017, the taxpayer submitted provisional tax returns showing zero taxable income.
On 13 July 2017, the trustees resolved that the taxpayer would cease being a South African tax resident because effective management had moved to Namibia.
The forward sale date was subsequently communicated as 18 September 2017, when the judgment records that delivery and payment took place. The proceeds were then vested in the Namibian T Trust, a non-resident beneficiary.
The judgment later refers to 18 January 2018 as the payment date, creating an apparent inconsistency. However, the Court's central finding was that the tax accrual occurred on 10 July 2017, when the FSA was concluded.
The tax date was not the cash date
The taxpayer argued that the proceeds only accrued when delivery and payment occurred. By then, it had become a Namibian tax resident. It argued that Article 13(4) of the South Africa–Namibia Double Tax Agreement therefore gave Namibia the taxing right.
The Court rejected the argument that the reciprocal obligations under the FSA postponed the tax accrual. The key provision was section 24(1) of the Income Tax Act.
The Court found that section 24(1) applied to the sale agreement and deemed the full sale price to have accrued when the agreement was entered into. The result:
The R1.87 billion sale proceeds were deemed to have accrued on 10 July 2017. That was before the taxpayer changed its tax residence. The practical lesson is important: Do not assume that the date of payment is the date of tax accrual. First determine when the taxpayer became entitled to the amount and whether a deeming provision changes the result.
What about the trust beneficiary?
The taxpayer also argued that it was effectively a conduit for the T Trust and that section 25B should apply. The Court rejected this argument.
First, paragraph 80(2) specifically regulates the attribution of capital gains distributed by a trust. The Court held that the relevant relief was not available because the beneficiary was not a South African resident.
Second, the timing did not work. Because the taxpayer ceased South African residence on 13 July 2017, section 9H deemed the 2018 year of assessment to have ended on 12 July 2017.
The FSA proceeds had accrued on 10 July 2017, while the beneficiary's vested right arose later.
The Court therefore found that the section 25B requirements were not met.
The penalties also mattered
The taxpayer argued that the failure to disclose the gain was a bona fide inadvertent error, but it led no evidence to establish this. The Court confirmed the 10% understatement penalty of R24.2 million.
The taxpayer also challenged the provisional tax penalty. Its July 2017 returns had reported zero taxable income, but there was no evidence showing that the estimate had been seriously calculated with due regard to the circumstances. The Court confirmed the R38.7 million provisional tax penalty.
The taxpayer also sought relief from the section 89quat interest, arguing that the circumstances were beyond its control. Again, it failed to provide the evidence required. The R79.1 million interest was confirmed.
What should practitioners take from the case?
When dealing with a major transaction involving a trust or a change in tax residence:
Establish the real accrual date
Cash receipt and tax accrual are not necessarily the same thing. Check the agreement and any applicable deeming provisions.
Check tax residence against the transaction timeline
A subsequent change in residence does not necessarily move an existing tax accrual into the new country of residence.
Check the trust rules carefully
Capital gains distributed by trusts require consideration of paragraph 80, as well as the residence of the beneficiary.
Apply section 9H correctly
A change in residence can create a deemed year-end, which may affect the application of other provisions such as section 25B.
Document provisional tax estimates
A zero estimate should be supported by a calculation and evidence showing why it was reasonable at the time.
Keep evidence for penalty disputes
If relying on a bona fide inadvertent error or circumstances beyond the taxpayer's control, the supporting evidence should be in the file.
The bigger lesson
The taxpayer changed its residence only days after signing the FSA, but the Court found that the critical tax event had already occurred.
The final amounts confirmed, including capital gains tax, understatement penalty, provisional tax penalty and interest totalled approximately R383.7 million, before costs. The appeal was dismissed and the taxpayer was ordered to pay the costs.
For practitioners, the question should therefore not simply be:
“When did the money arrive?”
It should be:
“When did the taxpayer become entitled to the amount, and what does the Income Tax Act deem to have happened?”
That date can determine the tax outcome long before the cash moves.
