New tax reporting obligations of trusts

A strong theme emerging from the South African Revenue Service (SARS) and National Treasury for the 2024 financial year, is that of reporting and trusts are not left behind.

Beneficial ownership

To comply with the Financial Action Task Force (FATF) requirements, SARS aims to record all beneficial owners of newly registered Trusts. SARS’s online query system has been enhanced to allow for the capturing of the beneficial owner’s details when registering new trusts for tax.

A beneficial owner has not been defined but guidance issued by SARS states that the representative taxpayer of the trust or main trustee is required to record the information of the founder, trustees, donor, protector and beneficiaries on the online query system.

The ultimate beneficial owner must be a natural person and if a trust has legal entities as beneficial owners, it must report the ultimate natural person who will enjoy the benefit of the assets or income that must be identified and disclosed.

Where trusts have more than 10 beneficial owners (natural persons), an organogram must be uploaded. The registration of beneficial owners will require an extensive exercise to ensure an accurate register of ultimate beneficial ownership.

Third party data reporting

SARS requires third-party declarations from banks, financial institutions, medical schemes, attorneys, and estate agents. This declaration process ensures that income accrued that that taxpayer is prepopulated on the taxpayer’s annual income tax return.

Currently, trust distributions are not reported to SARS by way of third- party data and therefore SARS does not have independent data to verify the distributions received by trust beneficiaries.

SARS proposes to use the ITR12T and IT3(t) processes simultaneously and eventually to merge them into one singe linked beneficiary system to ensure real time accurate data.

The reporting of beneficial owner information and the third-party declarations will place a substantive administrative burden on the representative taxpayer of the trust and have significant cost implications which may in most cases not be justified for the average family trust.

For more information on tax reporting obligations of trusts please contact Jan Louis Koen on 021 840 1600 or janlouis@asl.co.za.