Stokvels vs Trusts

Stokvels vs Trusts

Stokvels vs Trusts

June 2020

Helfin Private Wealth (Pty) Ltd

Stokvels Summary

  • Savings group of twelve or more individuals who come together to pool their finances for the benefit of the group
  • The members contribute a fixed sum of cash to a centralized account on a weekly, fortnightly or monthly basis
  • Usually deposited in less risky investments such as fixed deposit accounts to protect the capital invested by the members

Types of Stokvels:

  1. Contribution Stokvels (Members receive the lump sum amount on a rotational basis and are free to use the cash as they deem fit.)
  2. Property Stokvels (This is where the member’s contributions are used to buy properties in cash or within a shorter time frame than it would normally take)
  3. Basic Stokvels (The contributions are used for specific events like death or Christmas).
  4. Other types include party, grocery, purchasing, borrowing and family stokvels.

Stokvels Setup

Stokvel members

Choose the right and trusted Members to set up

Stokvel Constitution

Constitution set up to decide on guidelines for the Stokvel(contributions, meetings, withdrawals, new members and resignations etc.)

Stokvel Investments

Members make decisions on choice of investments based on timeframe and risk

Stokvel Bank Account

Group bank acc to be opened with two to three authorized signatories

Advantages and Disadvantages of Stokvels


  • Set up is easy and are not legal entities
  • Members can perform duties outside of interference from government
  • Promotes socialising and networking
  • Costs are low in setting up and running
  • Can be set up for any reason (loans, birthdays, groceries, holidays, savings)
  • Encourages savings behaviour
  • Encourages compliance by members


  • Penalisation for defaulting by members
  • Can be regarded as unreliable by defaulting
  • Pyramid schemes are often disguised as stokvels

Stokvels Constitution


 The NASASA constitution has been drafted and published by the National Stokvel Association of South Africa (NASASA) as a set of fundamental principles according to which a Stokvel or any community-based deposit-taking organisation is governed. Together, these principles define the Stokvel group premise. This document is a set of guidelines that a Stokvel group may use to create its own constitution.

Trusts Summary

A trust is a legal arrangement whereby control over property is transferred to a person or organisation (the trustee) for the benefit of someone else (the beneficiary). You can register two types of trusts, namely the

  • The inter-vivos trust is created between living persons
  • A testamentary trust is derived from the valid will of a deceased person

Trusts Setup

The inter-vivos trust must be registered with the Master of the High Court

The relevant and required documents must be lodged to issue letters of authority to the nominated

Payment to the Masters office to set up the trust

Donation to be made to the Trust by the founder

A bank account to be opened as soon as the trust is registered with the Master of the High Court

Trustees are required to present themselves to SARS in person in order to register the trust for Income Tax

Tax on Trusts

 A trust in South Africa is recognised as a ‘person’ in the Income Tax Act and taxed as such

Depending on the circumstances the income of a trust can be taxed in the hands of the:

  • Donor
  • Beneficiary or
  • Trust.
  • Where the trust itself is taxed, it’s taxed at a flat rate of 40%. Special trusts are taxed at a sliding scale from 18% to 40% (same as natural persons).
  • A trust must apply for registration within 21 business days of becoming liable for provisional tax
    Capital Gains within a Trust are taxed 36% and 18% for Special Trusts
    A Trust may also be liable for taxes such as VAT, payroll taxes, Donations Tax, Transfer Duty and Securities Transfers Tax

Costs of having a Trust

  • Set up cost incl. legal fees and registering a trust up to R5000
  • Cost to maintain a separate bank account
  • Annual financial statements
  • Income Tax and provisional income tax
  • Independent trustees fees

Advantages of having a Trust

  • Continuity – a trust survives the life of an individual (donor / trustee / beneficiary) and can span multiple generations
  • Can protect an individual’s assets from creditors and / or matrimonial and relationship disputes
  • Utilisation of services, knowledge and abilities of trustees
  • Custodianship of assets, preventing assets from being squandered
  • Management and control of trust assets – e.g. where there may be several owners of the same asset who cannot agree on how to manage the asset
  • Administration of asset for charitable purposes
  • Tax benefits can be created by the correct distribution of income and capital gains
  • Estate duty can be minimised or capped because the growth of an asset is no longer in the hands of mortal person

Disadvantages of having a Trust

  • Formation and administration of a trust is costly
  • Higher rate of income and capital gains taxes on distributions, if retained in the trust
  • Possibility of future legislative amendments which may adversely affect the benefit of the trust
  • Administrative and Taxation requirements such as: – Annual financial statements – Annual income tax return – Bi-annual provisional tax returns – Onerous duties of trustees
  • Must be relinquishment of control (SARS may deem income back to the donor of the asset if there is not adequate relinquishment of control over the asset)

Trust Legislation

 The trustee must ensure that the trust complies with the TPCA and all other applicable legislation, including, but not limited to, the following:

  • The Income Tax Act, 1962 as amended
  • The Banks Act, 1990
  • The Value-Added  Tax Act, 1991
  • The Financial Institutions Act, 2001
  • The Prevention & Combating of Corruption Act, 2004
  • The Financial Intelligence Centre Act, 2001
  • The Tax Administration Act, 2011

Please note that any information in our posts, documents, infographics, emails etc is general information and should not be considered as providing financial advice. We therefore disclaim all liability and responsibility arising from any reliance placed on such information by any reader, client or visitor to our website. Though we make every effort to ensure the accuracy of the information provided we accept no liability for any inaccuracies.