Hot off the press: SARS trust tax changes

SARS issued communication (“Trust Filing Season: Form and System Changes to be Introduced from 23 June 2023”) which trustees and trust service providers have to take note of.

Managing tax compliance matters

Trustees are reminded that trusts are included in the definition of a “person” in terms of the Income Tax Act, and as such, the representative taxpayer (trustee/s) has a responsibility to register all trusts for income tax purposes. Even “dormant trusts” have to be registered with SARS. Trustees will be held liable for non-registration.

All trusts to submit tax returns annually

Trustees are reminded that the annual notice, issued by the Commissioner, requires of all trusts to submit a trust tax return during the trust return filing period. It stresses that it is therefore imperative that all representative taxpayers of trusts (trustees) ensure compliance in this regard. It is clear that they look to the board of trustees to comply. Therefore, reliance by lay-person trustees on their accountants to ensure their legal obligations to SARS are met will not be excused.

Some important changes to the Income Tax Return for Trusts (ITR12T), with effect from 23 June 2023

• A simplified return for passive trusts - a less cumbersome return where limited trust specific activities occurred during the year of assessment. These are passive trusts with no economic activity (it may hold assets, but no ongoing activity in the trust), including “dormant trusts” (if there is such a thing).
• For distributions received from other trusts:
  • Additional questions were added to the Income Tax Return Wizard to determine if any local or foreign amount(s) were vested in the trust as a beneficiary of another trust; and the number of trusts from where these amounts were received.
  • Details to be provided per trust in the tax return. This will have to be clearly provided in the financial records of the trust.
• Information on donors/funders of the trust:
  • Additional questions were added to the Income Tax Return Wizard to determine if amounts were deemed to have accrued to a donor/funder in terms of Section 7 during the relevant year of assessment.
  • Donors or funders (where the deeming provisions of Section 7 apply) must declare trust income and capital gains attributed to them. A proper trust administration/accounting system will be required to keep track of this very complicated calculation.       
• Beneficial Ownership Declaration where beneficial owners and those who may gain financially from the proceeds of the trust need to be reported. Tax practitioners and trustees must take note that updated “beneficial ownership” information is also to be provided to the Master on an ongoing basis. SARS is one of the approved entities who have access to the Master’s portal, so an administration system that tracks real-time information on all beneficial owners should be employed to not fall foul of a mismatch of information provided.
• A new requirement to upload mandatory supporting documents with the tax return
  • All mandatory supporting documents must be uploaded and submitted with the trust tax return, including the trust instrument, annual financial statements and resolutions/minutes of trustee meetings. The requirements will vary according to the trust type. This is a new onerous requirement, which requires the employment of an integrated, trust administration system to ensure the legally required documents are complete and kept up to date in a real-time fashion. To perform this function manually, possibly relying on others to provide you with same will be a time-consuming, costly, risky approach.

 Filing period for 2023

• Non-provisional taxpayer trusts - opens on 7 July and closes on 24 October 2023.
• Provisional taxpayer trusts - opens from 7 July 2023 and closes on 24 January 2024.

 Beneficiaries of the trust

• Beneficiaries of a trust must declare income that was vested in them by the trust during the year of assessment in their respective income tax returns. This information will have to balance back to the new IT3(t)’s which trustees have to annually submit to SARS, based on distributions made to beneficiaries. The IT3(t)’s will have to be submitted before the trust tax returns are due. A proper trust administration system should be employed to ensure this information is available on a  real-time basis, very soon after the trust’s tax year-end, being February of each year. 

Registration of new trusts

• To register a new trust for income tax and submit supporting documents, use SARS’s online platform on their website at sars.gov.za in the SARS Online Trust Registration link.

Consider the Trusteeze platform, which provides for the following:

• All the Master’s forms are digitally populated on the platform through the press of a button
• The trust deed is populated digitally
• “Trust Deed Parameters” which ensure trustees remain compliant with trust deed
• Pre-populated trust resolutions (digitally signed) in line with trustees’ powers in the trust deed, which now needs to be submitted to SARS
• Digital meeting capability, including the population of meeting minutes (digitally signed), which now needs to be submitted to SARS
• Trust bank account integration
• Digital Asset Register in agreement with automatically populated financial information (in the format required for tax returns)
• Power of attorney to submit Beneficial Ownership info to Master - digitally signed which saves tremendous time (especially with the current pressure to get first reports on the platform)
• “Beneficial Ownership” reports are digitally populated on the platform. This is consistently used for reporting to the Master and SARS by the trustees and for the trust service provider to keep in their roles as Accountable Institutions with the FIC. You can now get indemnity from “beneficial owners” for non-cooperation, as they each have their own logins. The administrator gets notified of any change registered on the platform and can then generate and submit the report timeously (R 10 million fine or 5 years imprisonment, or both for non-compliance)
• Record keeping of interactions with Accountable institutions by trustees as required by Trust Property Control Act (R 10 million fine or 5 years imprisonment, or both for non-compliance)
• In testing phase with IT3(t) submissions
• Financial Statements which replaces other accounting software costs – provides all required information to do accurate tax calculations
• “Connected person” rules for SARS
• Soon new tax return submissions from raw data (supported by compliance records)
• Soon attribution details to donors/funders in terms of Section 7 of the Income Tax Act
• Digital data storage of all trust related documents
• Soon FICA digital capability through integration with a FICA software provider
• All data is consistently reported regardless whether you report to SARS, the Master, entity authorised per Regulation or an Accountable Institution - manage risk
• Get the participation of all trustees
• One can create wills through a will wizard which aligns with the trust deed/estate plan

If you want to see a demo of our digital trust administration, compliance and accounting system, please use this link - https://lnkd.in/e4jvz2F3.