The National Treasury’s intention to re-examine the tax treatment of trading profits in collective investment schemes has raised concerns about the potential effect on the industry and investors in these schemes. The perceived abuse of the schemes requires more clarity on the rules governing the tax treatment of trading profits. Collective investment schemes are tax exempt as these investments are held in long-term capital accounts. Their investors are taxed on their capital gains only when they sell their equity shares. The Treasury said in the national 2018 budget that some collective investment schemes were trading frequently and arguing that the profits were of a capital nature (and therefore not taxable). Should the trading profits made by fund managers in collective investment schemes be reclassified as income rather than capital, they could be taxed at a rate of 45%. Peter Dachs, joint head of the ENS Africa tax division, says this is the first warning shot that the authoriti...

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