The emphasis on trust tax compliance

• The urgency for trusts to align with SARS requirements. SARS will discuss penalties with Recognised Controlling Bodies. However, it is difficult to see why SARS will delay penalties much longer.
• Trustees are reminded of their full responsibility for tax compliance. With the deadline looming, trustees must act quickly to ensure compliance.

We highlight the concerning level of non-compliance among trusts on registration, filing, and payments. All trusts, operational or not, must submit an annual tax return, a requirement for over 20 years. If trusts have fallen behind, they should catch up with their filings. All trusts must register with SARS, not just the Master of the High Court. Data shows delayed registration. On average, trusts take two and a half years to register with SARS after registering with the Master. We also warn that delays or inaccuracies in tax returns could lead to costly penalties for trusts.

– Sam Murugan, Executive Advocate at SARS 

Administrative penalties for non-compliant trusts

• SARS would not impose penalties for non-submission of IT3(t) returns for the current assessment year. However, submission is strongly encouraged to build a compliant track record for trusts.

Administrative penalties for non-compliant trusts are often overlooked. Many trusts have underestimated the seriousness of SARS’ warnings due to previous inaction. This inaction is expected to change, with stricter enforcement starting soon. Even if April 2025 isn’t “D-day,” SARS’ grace period for penalties is coming to an end.

– Roxshanna du Toit, CPD Consortium

• The recent trust reforms suggest that SARS is serious about enforcement. Trustees should have recognised the growing focus of SARS on trust tax compliance. The formal imposition of penalties is a key step in SARS’ strategy.
• Trusts, especially dormant ones, are advised to submit tax returns. SARS does not recognise a “dormant” trust if it holds assets or liabilities. A nil return does not equate to dormancy if income, expenses, or liabilities exist. Even passive trusts must submit beneficial ownership details, regardless of their activity.
• SARS aims to record all beneficial owners of trusts to meet Financial Action Task Force (FATF) compliance. The FATF has identified actions South Africa must address to exit the grey list. Countries on the grey list face stricter monitoring of financial institutions to prevent terrorism financing. This monitoring brings additional costs for financial institutions.

The submission of key supporting documents

• SARS now mandates the submission of key supporting documents with trust tax returns. These documents include Trust Annual Financial Statements, Trustee Meeting Minutes, Trust Instruments, Ownership Documents, and Letters of Authority. SARS may request additional documentation for verification during the trust return process.
• Verification letters could address up to 15 points, including foreign investments and beneficiary details. SARS may also request trust bank account details and funding structures, including loan agreements.
• The role of trustees is crucial. They should never abdicate their responsibility under the law.