Trustees, take note! The South African Revenue Service (SARS) has just revamped the filing season for trust taxpayers. Starting in 2024, you’ll have dedicated time to submit your returns. It means more time to get your ducks in a row and new rules to follow. Why the change? SARS is tightening the screws on trusts to ensure that these financial structures are legal and transparent. As a result, stricter compliance requirements are in place. What does this all mean for trusts in South Africa? Let’s take a look!
Trusts in South Africa – Important changes from SARS
- Mark your calendars! The filing season for trust taxpayers now runs from September 16, 2024, to January 20, 2025. These new deadlines are crucial and require your immediate attention.
- Third-party returns: For the first time, trust taxpayers must submit IT3(t) returns by September 30, 2024.
- Increased compliance: Be prepared to meet higher standards of transparency and accountability.
Don’t get caught off guard. If you’re a settlor, trustee, donor, or beneficiary of a trust in South Africa, it’s essential that you understand these changes and ensure your trust is compliant. Failure to do so could result in hefty penalties and other legal consequences. The risks are real, and compliance is non-negotiable.
Trusts in South Africa – the new compliance requirements
SARS has tightened the reins on trusts in South Africa to boost transparency and ensure compliance with international standards. These changes are part of the country’s efforts to exit the greylisting and modernise its tax system, making it easier for taxpayers to become compliant using technology. As such, there have been significant changes to the trust tax return in South Africa and the extent of tax reporting required for trust taxpayers.
Fundamental changes to the trust tax return you need to be aware of
1. Beneficial ownership disclosure
- Enhanced transparency: Trusts must now provide detailed information about their ultimate owners, known as “beneficial owners.”
- Clear identification: This includes identifying individuals who have a significant interest in the trust, regardless of their formal legal position.
- Trusts must ensure the information reporting beneficial ownership provided is not just detailed, but also accurate and up-to-date. Precision is key in these new compliance requirements.
Read more: South African Tax News – beneficial ownership reporting is now mandatory for individual taxpayers!
2. Income and activities reporting
- Comprehensive disclosure: Trusts in South Africa must provide detailed information about their income sources and activities and how these align with their objectives.
- Alignment with trust purpose: The information should demonstrate that the trust’s activities are consistent with its stated objective.
- Supporting documentation: Trusts may need to provide additional evidence to substantiate income and activities.
3. IT3(t) reporting
- Annual reporting: Trusts must annually declare distributions to beneficiaries using the IT3(t) form.
- Accurate reporting: The information provided should accurately reflect the distributions made to beneficiaries.
- Compliance with reporting requirements: Trusts must adhere to the specific requirements and deadlines for IT3(t) reporting.
4. Mandatory document upload
- Supporting documentation: Trusts must upload supporting documents when filing their tax returns.
- Relevant documentation: Includes financial statements, resolutions, and any other documentation that can verify the trust’s financial activities.
- Compliance with requirements: The documents uploaded should be complete and accurate and comply with SARS requirements.
Five steps to ensuring trust compliance with SARS
To avoid penalties and maintain a compliant trust, consider these essential steps:
- Keep meticulous records: Maintain detailed records of all trust resolutions, financial transactions, and supporting documents that will be important when filing your tax return.
- Verify beneficial ownership: Double-check that your trust’s beneficial ownership register is accurate and matches the information reported to the Master of the High Court.
- Account for income and activities: Ensure your trust can clearly explain all income sources and activities and how they align with the trust’s objectives.
- Accurate IT3(t) reporting: To avoid penalties, report all distributions to beneficiaries accurately on the IT3(t) form.
- Stay informed: Review updates from SARS and other regulatory bodies regularly to stay current on the latest trust compliance requirements.
By following these guidelines, you can help ensure that your trust complies with South Africa’s tax laws.
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