CLIENT ALERT
Putting your vested shares into a company or trust? Know the risks first.
13 October 2026
If you have received shares from your employer that only “vest” (become yours to keep) after a period of time or once certain conditions are met, you may be considering holding those shares through your investment company or family trust - either by having the shares issued directly to that entity, or by moving the shares to the investment company or family trust before vesting. Before you do, it is worth understanding three risks that can turn a “planning opportunity” into a costly exercise.
Risk 1: You are taxed personally either way
Moving the shares into a company or trust does not change who pays the tax. The tax law looks through the entity and taxes the growth in the shares up to vesting at your own personal tax rate (as high as 45%) as if you had received and held the shares yourself. Your employer is still required to withhold the tax (PAYE) through the payroll upon vesting of the shares, even though the shares are being held by the company or trust. As you have received a non-cash benefit this may create a cash-flow problem when your employer has to withhold the PAYE from your salary and if your salary is not large enough to cover the PAYE, you may need to fund the shortfall yourself, before you have received any benefit from the shares.
Risk 2: Extracting the value later can cost you more
Even if you have paid the vesting tax (PAYE), the shares still belong to the company or trust, not to you personally. If you later want to access that value, for example sell the shares to settle the PAYE, you may face a further cost where the shares are held by a company:
- Investment company: extracting money as a dividend triggers an additional 20% dividends tax.
Risk 3: An unexpected donations tax bill
If no money changes hands, SARS will treat the move of shares into a connected company or trust as if you had made a donation to the company or trust, even if the shares are allocated there by your employer. This triggers donations tax of 20% on the value of the shares (25% if cumulative donations exceed R30 million) in addition to the income tax already payable on vesting.
What this can add up to
The example below illustrates the combined effect for a share worth R100 at vesting, assuming no amount was paid to acquire the share. It shows how the tax cost increases depending on who holds the shares[1].
| Share worth R100 at vesting, no consideration paid | Kept in your own name | Held by a family trust | Held by an investment company |
|---|---|---|---|
| Income tax (PAYE) | R45 | R45 | R45 |
| Donations tax | – | R20 | R20 |
| Dividends tax on extracting the money | – | – | R20 |
| Total tax paid | R45 | R65 | R85 |
| Effective rate | 45% | 65% | 85% |
Our advice
Holding shares received from your employer in an investment company or family trust can still form part of your broader estate or investment planning, but as the discussion above illustrates it brings additional tax consequences that need to be considered carefully before a decision is made, particularly where the shares are moved into the entity before vesting. Doing this after vesting, once the income tax on the shares has already been settled, avoids the income tax mismatch described above, though transferring shares to a connected company or trust for less than market value can still trigger a donations tax liability. Such transfer requires adequate planning.
Considering this structure? Talk to us first
Every client's situation is different, and small differences in timing or structure can have a significant tax impact. If you are considering acquiring shares through or transferring vested or unvested shares into an investment company or family trust, please contact us before taking any action so that we can assess your specific tax position and assist you in structuring correctly from the outset.
[1] This is a simplified illustration to show the general principles, not a precise calculation for your circumstances — your own tax position will depend on the specific facts.