Trusts, tax and IT3(t)’s

Office Closure during the holiday season
September 18, 2023
Trusts, belasting en IT3(t)’s
March 11, 2024

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To “t” or not to “t”…, that was the question. Over the past 18 months, the reporting framework governing trusts and the ensuing burden placed on trustees have been subject to intense scrutiny following South Africa’s greylisting due to (potential) money laundering and terrorist financing activities.

Newly release regulations as stipulated in Act No. 22 of 2022: General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act alongside amendments to existing regulations in the Trust Property Control Act, No. 57 of 1988, the Companies Act, No. 71 of 2008 and Section 26 of the Tax Administration Act, 2011, have all been introduced to mitigate the risks associated with money laundering and to augment the reporting obligations to be undertaken by trustees on trust matters to the South African Revenue Service (SARS).

Trusts were included in the list of entities required to submit trust-related information to SARS as part of their initiative to enhance the third-party data reporting system, as detailed in Government Gazette No. 48867 published on 30 June 2023. The third-party reporting system has been successfully implemented by SARS with various financial service providers such as banks, investment brokers, medical aid funds and retirement funds.

Following the relevant submissions of trust information, SARS will be able to accurately compare the data submitted the third-party institutions (such as accountants and auditors) to the information completed by the taxpayers in their income tax returns. The Gazette stipulated that the following information must be provided by trustees to SARS:

  • demographic information of the reporting trust;
  • demographic information of trust persons / beneficiaries;
  • taxable amounts distributed or vested to beneficiaries;
  • details of non-taxable income distributed; and
  • financial flows of cash and other transactions from the trust to its beneficiaries.

The Gazette stated that the information must be provided for a financial year running from 1 March to 28/29 February, with a submission deadline of 31 May. For instance, reporting for the 29 February 2024 financial year would have to be submitted by 31 May 2024. However, the reporting deadline was amended on 10 November 2023 in Government Gazette No. 49646, to 30 September of each year. Therefore, the submission deadline of the newly implemented IT3(t) for the 1 March 2023 to 29 February 2024 financial year is 30 September 2024.

The practical implications of the amendments are that trustees of a trust must ensure that the financial records of the trust are properly maintained on a continuous basis. This enables sound and timeous decision-making regarding the distributions to beneficiaries for a financial year and subsequent reporting thereof to SARS on behalf of the trust.

We will engage with our clients in due course to assess their situation and to determine what steps can be taken to ensure compliance with the submission deadline.

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