SARS overhauls trust returns: 5 major changes

By Sidney Fletcher TTP(SA) Senior Manager Trust and Deceased Estate Tax Compliance

and Micaela Paschini Tax Attorney

Sidney Fletcher 

SARS has completely overhauled tax returns for trusts. Although this has been hinted at for a long time, the degree of overhaul is far from expected. he warning signs started late last year, when SARS published a notice under which trusts will be required to submit third party returns, confirming the amounts vested in beneficiaries during a given tax year

Following this, SARS released a statement this past week indicating that as from 23 June 2023, a range of changes will take effect. SARS states that “these changes will provide taxpayers with the clarity and certainty they require to meet their tax obligations, making it easier for them to comply” (emphasis added.

Micaela Paschini

 A word of caution. The changes constitute a complete overhaul of the trust return process and will require trustees to truly apply their minds when submitting tax returns come 7 July 2023.  Although there are significant changes to the trust tax return, SARS managed to keep the look and feel of the return the same as other tax types. Five major changes have been introduced in the process. Trustees, when submitting a tax return, will now need to declare the following: 

1 SARS wants to know exactly who the “Beneficial Owner(s)” of the trust are. This is an international term and tax practitioners who work in international tax law are well familiar herewith. The term seeks to address the “warm body” who sits behind a trust and SARS wants to know the full details of this person. This is also a requirement for even passive trusts! The maximum number of beneficial owners are currently capped at 20.

2 There appears now a compulsory requirement for Annual Financial Statements for trusts. This is not a requirement in many trust deeds, but based on a SARS Media Release, this will be asked for by the taxman.

3 Vesting from another South African or Foreign Trust. There are very targeted questions hereon and SARS must have seen arrangements they do not like, taken the level of details now required on such transactions. 

4 SARS wants to know where people behind a trust physically stay. There are new questions on the physical address of the beneficial owner, and this is a compulsory field. It is also interesting to note that when any entity type, other than individual, is selected, an additional requirement to submit details of the Registered Representative is now required. 

5 A wide range of supporting documentation must be submitted, including the trust deed, annual financial statements and trust resolutions. The exact supporting documentation will be determined by the type of trust that will be selected. Each document must be added to the correct description in the drop-down list.

Risk of non-compliance and criminal sanction 

The amended provisions of the Trust Property Control Act impose harsh penalties on trustees found guilty of non-compliance. This can lead to a fine not exceeding R10m, or imprisonment not exceeding 10 years.

This extends to any tax practitioners, accountants and financial planners, who should be aware that any submission of false documentation or statements on behalf of their clients is considered an offence regardless of negligence. Upon conviction, they may be subject to a fine or imprisonment not exceeding five years.   With this in mind, it is imperative for trustees and/or their advisors to be diligent when approaching the trust return and ensure all documentary evidence is in place. Failing to do so will result in an uncomfortable SARS audit for the trust, and a possibility of tax practitioners expelled from their controlling bodies due to non-compliance. The complexity and cost of operating a trust will be impacted by these changes, as the SARS compliance landscape has completely changed

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