SARS expects ongoing compliance for trusts 14 September 2023

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At the recent South African Institute of Taxation (SAIT) Tax Indaba, trusts were on the agenda again. In conversation, the message of the South African Revenue Service (SARS) was loud and clear – new measures they have put in place are aimed to give SARS the assurance that trusts are run as separate entities (such as companies) on a real-time basis and not on an ad-hoc basis in an attempt to proof compliance.

Is the tax practitioner becoming the final verifier of trust compliance? 6 September 2023

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As a result of recent changes, the tax practitioner now has to submit a list of information to the South African Revenue Service (Sars) with the trust tax return. This includes the latest trust deed, resolutions, minutes of the trustee meetings, and so forth

Material value unlocked by a family trust as Naspers/Prosus shareholder 22 April 2023

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Naspers was founded in 1915 as Die Nasionale Pers. The company was listed on the Johannesburg Stock Exchange (JSE) in 1998 and changed its name to Naspers. Over the years it held well-known brands and of course Tencent, one of China’s biggest technology companies (it acquired a 46.5% stake in 2001). Tencent was the goose that laid the golden eggs, as its market cap grew from R 5.3 billion to R 83.3 trillion. Prosus, now a global consumer internet group and one of the largest technology investors in the world, which was created in 1997 as a separate holding company of Naspers (holding 73% of the its shares), holding most of the Naspers investments, including that of Tencent, listed through a primary listing on Euronext Amsterdam and a secondary listing on the JSE in 2019. Although Naspers was one of the top-performing shares on the JSE over the last twenty years, with a compounded annual return of 32% (with Tencent as the main contributor), the discount to its top-performer Tencent grew. The group decided to start a share buy back programme. Shortly after this announcement, since June 2022, Naspers and Prosus directors and executives sold over R 5 billion in Naspers and Prosus shares.

Who will be punished: the trustee, independent trustee, trust service provider, accountant, or tax practitioner? 18 March 2023

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Overnight, the world of trusts has changed. That, while a large percentage of trusts in South Africa do not even have an independent trustee appointed who can guide the lay-person trustees, being the estate planner, their spouse, children, friends and so on. In many instances, the accountant, attorney, or financial adviser of the estate planner agreed to act as trustee of the trust, with the expectation that they should not interfere too much in trust decisions. These trusts were structured cleverly to allow the husband and wife (for example) to outvote the independent trustee, using the majority vote rule in the trust deed – in effect ‘window dressing’. These independent trustees often have no idea what is happening in the trust and are often excluded. With all the recent changes affecting trusts, it begs the question – who will be punished for any wrongdoing, negligence, or non-compliance of a trust? If things do go wrong, can any trustee claim ignorance?

Changes to legislation trustees should be aware of - 18 February 2023

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Due to the risk that South Africa may be greylisted in February 2023, Treasury legislated measures on 22 December 2022 to demonstrate that our government has introduced measures to improve shortcomings identified by the Financial Action Task Force (FATF) mutual evaluation report that threaten the international financial system. Amendments to the following legislation has been made: Financial Intelligence Centre Act, the Non-profit Organisations Act, Trust Property Control Act, the Companies Act and the Financial Sector Regulations Act. Trustees should be aware of the changes to the Trust Property Control Act, as non-compliance may lead to a fine not exceeding R 10 million or imprisonment not exceding 5 years or both. The following changes were introduced:

Wait before you accept your Sars auto-assessment and before you submit any tax returns - 15 July 2023

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A complicated part of a trust is its tax treatment; the fact that it is a taxpayer of last resort. This means other taxpayers may have to reflect trust generated income and capital gains in their tax returns, rather than the trust, on its tax return. This may affect provisional tax returns (due the end of August and February each year) and annual tax returns. Given the recent changes to trusts in South Africa and with the South African Revenue Service (Sars) zooming in on trusts, taxpayers and tax practitioners need to heed the warning below.

The Financial Intelligence Centre Act and trust service providers - 11 April 2023

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Trustees and trust service providers have recently been exposed to numerous new far-reaching measures in an attempt by the government to demonstrate its effectiveness in managing money laundering and terrorist financing in South Africa (initially to avoid greylisting by the Financial Action Task Force (FATF). As an example, the General Laws (Anti-Money Laundering and Combatting Terrorism Financing) Amendment Act 22 of 2022 was promulgated on 29 December 2022, amending the Financial Intelligence Centre Act, the Non-profit Organisations Act, the Trust Property Control Act, the Companies Act, and the Financial Sector Regulations Act. Although a lot of focus is currently placed on trustees’ obligations to maintain and report “beneficial owners” information to the Master of the High Court, equally onerous new obligations are placed on trust service providers in terms of the Financial Intelligence Centre Act, which was also amended on 29 December 2022.

A problematic case for trustee decision-making which needs fixing - 24 June 2023

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On 26 May 2023, the Supreme Court of Appeal delivered judgment in a matter between Shepstone & Wylie attorneys and the trustees of the Penvaan Property Trust.  It becomes clear upon reading of this case that strong reliance was placed by the Court on its interpretation (in many peoples’ views incorrectly so) of the trust deed, which unfortunately was not well crafted. The Court (unfortunately) interpreted the trust deed in a peculiar way, given the fact that it is fraught with problematic clauses and unwise structuring. These issues have seemingly resulted in a new strange requirement of how trustees ought to make decisions. The problematic trust deed may, therefore, to a degree be blamed for this adverse outcome for Shepstone Wylie.