Has time run out for trustees to hide from Sars?

The South African Revenue Service (SARS) presented a webinar on 29 July 2021 called Trust and Tax obligations, wherein they made it clear that there is a great focus on trust tax compliance. With approximately only 11% of trusts being tax compliant in South Africa, SARS will have a field day with the implementation of their nine strategic objectives, leaving trusts at great risk due to non-compliance. This may in turn lead to trustees being held personally liable by beneficiaries for not fulfilling their fiduciary obligations. Section 1 of the Income Tax Act defines a trust as “any trust fund consisting of cash or other assets which are administered and controlled by a person acting in a fiduciary capacity, where such person is appointed under a deed of trust or by agreement or under the will of a deceased person.” This definition was inserted following the decision in CIR v Friedman case of 1993, in which it was held that under common law a trust is not a “person”. A fiduciary duty is an onerous, legal obligation (a duty of loyalty and care), of a person managing property or money belonging to another person, to act in the best interests of such a person. The following strategic objectives were discussed, which trustees should take to heart and get their affairs in order (as a matter of urgency) to avoid surprise attacks from SARS, which may costs trusts – and potentially trustees – dearly, financially.