Sidney Fletcher | Senior Manager | Trust and Deceased Estate | Tax Compliance | Tax Consulting SA | mail me |
Historically, the filing season for trust taxpayers aligned with that of individual taxpayers. However, trusts now have their own dedicated filing season, starting 16 September 2024 to 20 January 2025.
With 2024 being the first year that trust taxpayers are tasked with submitting third party IT3(t) returns to South African Revenue Service (SARS) by 30 September 2024, this change of the filing season could potentially offer a silver lining for trust taxpayers, granting them additional time to prepare for their 2024 tax return filing along with the added compliance measures that come with the submission.
Trusts have encountered a wave of compliance changes in the recent year with SARS introducing enhanced compliance requirements to increase transparency and ensure that trusts are used for legitimate purposes. For settlors, trustees, donors, and beneficiaries, understanding these changes and ensuring compliance is essential.
New compliance requirements
The new compliance measures introduced by SARS are mainly driven from international pressure to ensure enhanced compliance of trusts, and various initiatives can be directly tied to South Africa’s commitments and actions aimed at exiting the grey listing as well as to ensure that trust taxpayer compliance is enabled through technology. These measures have resulted in changes to the trust tax return and the extent of tax reporting required for trust taxpayers.
Key changes to the trust tax return
In 2023, significant amendments were made to the trust income tax return, with these changes expected to continue in the 2024 tax season.
Trusts must now provide more detailed information in several key areas that include:
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Beneficial ownership
One major change is the requirement for the detailed disclosure of the beneficial ownership of the trust. Trusts must now provide comprehensive information about individuals, including beneficiaries identified as beneficial owners. Accurate reporting of this information is crucial for compliance.
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Income and activities
Trusts are now required to disclose detailed information about their income and activities. This includes comprehensive reporting on all income sources, the nature of the trust’s activities, and how these activities align with the trust’s objectives. This helps SARS verify that trusts are used appropriately and transparently.
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IT3(t) reporting
In line with its modernisation efforts, SARS is expanding third-party data information requirements. Trusts must now declare distributions to beneficiaries annually through IT3(t) reporting.
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Compulsory upload of supporting documents
Sufficient documentation is required to support the information disclosed in the trust income tax return. Especially since all trust taxpayers are now subject to a compulsory upload of supporting documents upon filing their tax return, trusts must maintain accurate and complete supporting documents to demonstrate compliance. This includes trust financial statements, resolutions, and any other relevant documentation verifying the trust’s financial activities.
Ensuring compliance
To ensure your trust complies with the new SARS requirements, consider the following:
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Maintain detailed records
Ensure you have meticulous records of all resolutions passed and financial transactions during the tax year, ensuring that these supporting documents are readily available to submit to SARS as part of the tax return filing.
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Accurate beneficial ownership disclosure
Double-check that all beneficial owners are correctly reported and match the beneficial ownership register that is lodged with the Master of the Hight Court.
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Comprehensive reporting of income and activities
Ensure you can account for all income sources and activities, aligning them with the trust’s objectives.
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Accurate IT3(t) form submission
Report all amounts vested or distributed to trust beneficiaries accurately on the IT3(t) form to avoid penalties.
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Stay informed
Regularly review updates from SARS and other regulatory bodies to stay up to date with the latest trust compliance requirements.
In conclusion
Ensuring compliance with the latest SARS requirements is essential for trusts. By seeking professional advice, and staying informed about regulatory updates, you can confidently tackle these new compliance requirements.
For more information and updates on the new compliance requirements for trusts. Your trust’s tax compliance with SARS is not merely a regulatory tick box to check; it is the foundation of transparency and ensures your trust can navigate the financial and compliance landscape with confidence and integrity.
Related FAQs: Trusts – tax compliance with SARS
Q: What is the difference between a resident trust and a non-resident trust in terms of tax compliance?
A: A resident trust is subject to South African tax laws and is required to comply with the Income Tax Act, while a non-resident trust is only taxed on income sourced within South Africa. Thus, their tax compliance obligations differ significantly.
Q: How can I ensure my trust is tax compliant with SARS?
A: To ensure your trust is tax compliant with SARS, you must register with SARS, submit required returns and adhere to compliance obligations such as provisional tax returns and annual income declarations.
Q: How do I submit my trust’s data to SARS via eFiling?
A: You can submit your trust’s data to SARS via eFiling by logging into your eFiling account, selecting the appropriate tax return for your trust and ensuring that all required information is accurately filled out before submitting.
Q: What are the compliance obligations for a special trust?
A: Special trusts have specific compliance obligations under the Income Tax Act, including submitting annual returns, adhering to the provisions laid out in the trust instrument and understanding how capital gains tax may apply to their income.
Q: What is the significance of Section 18A in trust tax compliance?
A: Section 18A of the Income Tax Act provides tax deductions for donations made to approved public benefit organisations, which can be relevant for a trust if it engages in charitable activities and wishes to claim such deductions.
Q: How can I resolve issues with my trust’s tax compliance through the SARS website?
A: You can resolve issues with your trust’s tax compliance by visiting the SARS website and using the SARS online query feature, where you can ask questions, submit documents or clarify any compliance concerns you may have.
Q: What types of returns are required to be submitted for a non-resident trust?
A: A non-resident trust must submit returns that detail income sourced within South Africa, including capital gains and any relevant third-party returns to SARS, following the specific conditions outlined in the trust instrument.
