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New Era for Trust Reporting Requirements

SARS has officially broadened its third-party reporting requirements to encompass trusts.  This was communicated in a Government Gazette notice issued on 30 June 2023. This legislative change is one of several, following the country’s greylisting by the Financial Action Task Force due to concerns regarding the adequacy of South Africa’s anti-money laundering initiatives.

Under this Gazetted amendment, all South African trusts and certain foreign trusts are now mandated to submit returns of third-party data as required by SARS, including relevant taxpayer information, transactions and the values thereof.  This increase in data disclosures aligns with SARS’ ongoing strategic initiatives to promote income tax compliance.

Trustees and beneficiaries must exercise due diligence to acquaint themselves with these new provisions and engage their trust services providers to ensure adherence to these obligations, as failure to meet the reporting requirements could lead to severe consequences.

SARS Offering Leniency

The initial plan proposed that trusts must provide 3rd party information from September 2023. However, due to the significant impact this would have on trust reporting, SARS has extended the deadline to May 2024.

This extension provides additional time that can be utilised for effective planning, consolidation, and implementation of the necessary measures to meet these new obligations. With the extended deadline and prior notification, trusts are expected to adhere to the new requirements, leaving no room for non-compliance.

Adapting To The New Expectations

Under the new provisions set forth by SARS, it is now mandatory for all trusts registered in South Africa to submit third-party returns. These returns are expected to contain comprehensive details concerning taxpayer information, transactions, and corresponding amounts. Non-residential trusts must also present an annual income tax return to SARS, which must adhere to these updated regulations.

To adhere to the new guidelines, trusts are now required to file an IT3(t) form. This form should include details of any amount vested in a beneficiary, be it income or capital. Additionally, SARS has mandated the disclosure of the following details:

  • Demographic data of the reporting trust.
  • Demographic information of trustees and beneficiaries.
  • Taxable amounts that have been distributed and vested in beneficiaries.
  • Details concerning non-taxable income distribution.
  • Financial flows within the trust.

The Case of Non-Compliance

SARS is authorised to gather third-party information through the submission of third-party returns. As a result, introducing these new requirements broadens SARS’ capacity to detect and address any non-compliance observed. Should beneficiaries fail to declare the required information in their returns accurately, SARS can raise an additional assessment.

Understatement penalties will be levied when trust beneficiaries fail to disclose their information fully. Moreover, SARS is permitted to impose criminal sanctions for non-compliance. Therefore, it is crucial for beneficiaries to stay informed about the distributions allocated to them and to exercise diligence when submitting returns.

Safeguard Trust Compliance with MMS
Trusts must adhere to SARS’ new regulations to ensure compliance and satisfy new third-party return requirements. The May 2024 deadline is expected to pressure trusts and their administrators to finalise all financial statements on time. The experts at MMS Trust Services are experienced in all aspects of legislation pertaining to trust accounting and taxation matters.  Reach out to our team if your Trust requires professional services to meet the new compliance legislation. 

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