Flat rate tax on private income from capital and capital gains

Which Trusts Do The Special Income Tax Capital Gains Tax Rules Apply To

The scope of these special rules includes trusts not only for disabled beneficiaries but also for beneficiaries under the age of 18 at least one of whose parents has died. This is why sometimes you will hear these rules known as applying to ‘vulnerable beneficiaries’ as they apply to a broader range of people than just disabled people. Neither income tax nor capital gains tax relief will be available where a beneficiary set the trust up for themselves. Here we will only think about the special rules as they apply to disabled beneficiaries, hence our use of the term ‘trusts for disabled people’ (or disabled trusts) rather than ‘trusts for vulnerable beneficiaries’ – their official name. For more information on trusts for vulnerable beneficiaries, you could look at HMRC’s

manual.

("Abgeltungsteuer")[edit] Since 2009-01-01 Germany levies a flat rate tax on private income from capital and capital gains called the Abgeltungsteuer. The tax rate is 25% plus 5.5% solidarity surcharge. The tax is levied at German sources as capital yields tax. A tax refund is possible if the personal income tax rate is below 25%. The Abgeltungsteuer replaces the earlier half revenue procedure [de] that had been in effect in Germany since 2001.

treatment? There are two steps to getting the special treatment: 1. If both the type of trust and beneficiary qualify as described above, the trustees and the beneficiary can jointly make a ‘vulnerable person election’, as described below. This election must be made within 22 months of the end of the tax year when it is first to have effect. It is irrevocable, but has no effect unless a further election is made, as described below. 2. Once the vulnerable person election has been made, as above, this allows the trustees alone to take a decision year by year as to whether to make an election for special tax treatment. This special treatment aims to ensure that the trustees are liable to income tax and capital gains tax on the trust income and gains at the

same rates as the beneficiary would have been had they been the beneficiary’s income and gains – usually meaning they pay less tax. Normally the trustees would make this election in the trust’s tax return but it can be made at any time up to 5 years from 31 January following the end of the relevant tax year. Competent professional advice is needed to carry out any of the calculations to determine the lowest overall tax charge. See the introduction to this page for information on where to find such help.

Banner-aside

How Do I Avoid Paying Income Tax On Capital Gains

Income Tax And Capital Gains Tax Issues

Because a trust is not a person, its income is not taxed like that of an individual or company unless it is a corporate, public or trading trusts as defined in the Income Tax Assessment Act 1936. In essence the tax treatment of the trust income depends on who is and is not entitled to the income as at midnight on 30 June each year. If all or part of the trust’s net income for tax purposes is paid or belongs to an ordinary beneficiary, it will be taxed in

their hands like any other income. If a beneficiary who is entitled to the net income is under a “legal disability” (such as an infant), the income will be taxed to the trustee at the relevant individual rates. Income to which no beneficiary is “presently entitled” will generally be taxed at highest marginal tax rate and for this reason it is important to ensure that the relevant decisions are made as soon as possible after 30 June each year and certainly within 2 months of the end of the

year. The two month “period of grace” is particularly relevant for trusts which operate businesses as they will not have finalised their accounts by 30 June. In the case of discretionary trusts, if this is done the overall amount of tax can be minimised by allocating income to beneficiaries who pay a relatively low rate The concept of “present entitlement” involves the idea that the beneficiary could demand immediate payment of their entitlement. It is important to note that a company which is a trustee of a trust is

not subject to company tax on the trust income it has responsibility for administering. In relation to capital gains tax (CGT), a trust which holds an asset for at least 12 months is generally eligible for the 50% capital gains tax concession on capital gains that are made. This discount effectively “flows” through to beneficiaries who are individuals. A corporate beneficiary does not get the benefit of the 50% discount. Trusts that are used in a business rather than an investment context may also be entitled to additional tax

concessions under the small business CGT concessions. Since the late 1990s discretionary trusts and small unit trusts have been affected by a number of highly technical measures which affect the treatment of franking credits and tax losses. This is an area where specialist tax

Banner-aside

Income From Capital Gains Tax

Share this post:

Avatar

BlogNiche.com

Professional niche blogs with track record over 1M+ blog posts, Still counting.

Connect: View All Posts

0 replies


Write a reply