VAT on Trusts

​

 

A trust exists where a person (referred to as a trustee) holds, as owner, or has vested in him property under an obligation to deal with that property for the benefit of persons (called the beneficiaries), whether or not yet ascertained or in existence, which is not for the benefit only of the trustee, or for a charitable purpose or for both such benefit and purpose aforesaid. (The Trusts and Trustees Act, 2005)

 

A trust thus creates the following major legal capacities for persons. A Person in this context may mean also a body of person:

 

o The Settlor – the person who creates the Trust.

 

o The Trustee – the person who has full ownership of the property but with restricted application. He may appoint a Nominee, in whose name the Trust is held.

 

o The Beneficiary – the person or persons for whose benefit the property is held, managed and administered by the Trustee. The beneficiary has a right over the Trustee on the amount derived from the sale of the property.

 

o The Protector – a person appointed by the Settlor to control the Trustee.

 

There are two types of Trusts:

 

Fixed Interest Trust – the interest of the beneficiary is defined by the Trust itself

Discretionary Trust – the Trustee decides upon his discretion on what he gives to the beneficiaries.

 

A Trust may have more than one Trustee in different countries.

 

A Trustee has to maintain the Trust on its own and cannot consider the property in the Trust as forming part of his personal property.

 

​

How are Trusts considered for VAT purpose?

 

As the Trust itself merely consists of property and/or other assets, there is no economic activity carried on and therefore it is outside the scope of VAT.

​

 

​