Supplied by Sars

The filing season for trusts runs between 16 September 2024 and 20 January 2025. This article supplied by the South African Revenue Service (Sars), outlines the tax obligations for trusts.

Filing season for trusts

As per GN4918 GG50741/31-5-2024 trust taxpayers have a dedicated filing period of four months commencing on 16 September 2024 until 20 January 2025. This filing period will apply to both provisional and non-provisional trust taxpayers. Trustees, tax and legal practitioners should, however, not delay in attending to the trust’s annual Income Tax Return (ITR12T), which is an extensive document with tax information requirements to increase the transparency and tax compliance of trusts.

Trust Filing Season 2024 will prioritise the registration of trusts for income tax, on-time filing, accurate and thorough declarations in the tax returns of trusts and beneficiaries, and on-time payment of tax owing per the trust’s tax assessment. Sars has also modernised several processes that were previously manual to make it easy for taxpayers to comply with their tax obligations.

Legal liability of the trustees

The Trust Property Control Act 57 of 1988 (TPCA) mandates trustees to act with care, diligence, and skill in managing trust affairs. The ‘joint-action rule’ requires co-trustees to act collectively. While trustees may delegate tasks, they retain ultimate responsibility. The TPCA voids any trust deed provisions attempting to exempt trustees from liability. Trustees are legally liable for meeting a trust’s tax obligations even where legal and/or tax practitioners are appointed.

Under the Income Tax Act 58 of 1962 (ITA), a trust’s trustee is a ‘representative taxpayer.’ The Tax Administration Act 28 of 2011 (TAA) defines ‘taxpayer’ to include ‘representative taxpayer,’ which refers to the ITA definition, creating a consistent legal framework for trustee tax responsibility. The TAA holds representative taxpayers, including trustees, liable for trust tax debts in both official and personal capacities (ss 154 and 155 of the TAA).

Sars will hold all the trustees of a trust jointly and severally liable for the tax non-compliance of trusts which may include attachment of a trustee’s personal assets.

Legal and tax practitioners

Under ss 234 and 241 of the TAA, Sars has specific mechanisms to hold legal and tax practitioners accountable. By leveraging these sections, Sars aims to maintain the integrity of the tax system and ensure that practitioners adhere to professional standards.

Tax obligations of a trust

• Tax registration of a trust

Legal and tax practitioners must ensure that all trusts on their records are registered with Sars for income tax and any other taxes that it may be liable for. This must be done after registration with the Master of the High Court. Tax registration of the trust may be done digitally via the Sars online query system found on the Sars website (https://tools.Sars.gov.za) or at a Sars branch after making an eBooking appointment also via the Sars website (https://tools.Sars.gov.za). The Sars website provides a list of Trust tax registration supporting documents (www.Sars.gov.za).

• Tax filing and accurate declarations

A trust is a legal arrangement and a taxpayer. It is obligated to file an annual income tax return even if it is inactive. Taxpayers must register for eFiling to file the trust income tax return. A simplified tax return is available on eFiling for passive trusts. The ITR12T tax return is enhanced with a beneficial ownership declaration page to record all beneficial owners and those who may gain financially from the proceeds of the trust taxpayer. A trust with ten or fewer beneficiaries, may have the ITR12T tax return captured at a Sars branch provided a prior branch appointment eBooking has been made via the Sars website (https://tools.Sars.gov.za) and the return has been printed with required fields completed ahead of the appointment. Sars branches will no longer print the ITR12T income tax return. Any trust that distributed amounts to more than ten beneficiaries during the year of assessment must register and submit the ITR12T via eFiling.

The representative filing the ITR12T tax return must ensure all the trust’s details are correct by verifying and updating these details on the Registration, Amendments and Verification Form (RAV01) on eFiling. More information may be viewed on the Sars Trust webpage (www.Sars.gov.za).

• Relevant records and material

The supporting documents required to file the return include all certificates and documents relating to income and deductions, statement of assets and liabilities, financial statements and/or administration accounts, proof of payment of any tax credits, details of persons or beneficiaries to whom income, capital and/or assets distributed, and a list of all beneficial owners that may exercise effective control over the trust.

• Payment

The notice of assessment issued to the trust taxpayer outlines the due date and grace period for making payment after an assessment has been issued. Late payments will attract penalties and interest. Payment arrangements can be made with Sars via eFiling or the Sars MobiApp.

• Dispute resolution process

An automated process for trust taxpayers was introduced on eFiling this year to electronically submit documentation to lodge a dispute. This applies to a Request for Reasons, Request for Remission (RFR), objections and appeal notices. A request for suspension of payment currently remains a manual process. Trusts that submitted any of these types of requests prior to 20 April 2024 should continue and conclude their dispute through the manual process.

Declaration of distribution of assets and income due 30 September 2024

The IT3(t) is a new third-party data return that needs to be submitted by the representative taxpayers of trusts. For the 2024 year of assessment, the first returns are due for submission by 30 September 2024. The purpose of the IT3(t) is for the representative taxpayers of a trust to provide details of amounts vested in beneficiaries for a specific year of assessment. Where an amount is attributable to a donor (eg, s 7 of the ITA) this amount should also be reflected. From the 2025 year of assessment, the IT3(t) will be used to populate the returns of beneficiaries with amounts vested to those beneficiaries by the trust.

More information may be found on the Sars website at Trusts (www.Sars.gov.za). Sars hosted a webinar on trusts tax compliance earlier this year, available at www.youtube.com.

This article was first published in De Rebus in 2024 (November) DR 17.