The South African Revenue Service (SARS) released a communication titled “Trust Filing Season: Form and System Changes to be Introduced from 23 June 2023” Trustees and trust service providers are required to be aware of this communication.
Overseeing tax compliance obligations
Trustees should be aware that trusts fall within the category of “persons” as defined by the Income Tax Act. Consequently, it is the responsibility of the representative taxpayer (trustee/s) to ensure that all trusts are registered for income tax purposes. This requirement applies even to “dormant trusts.” Trustees will be held accountable for any failure to register with SARS.
Mandatory annual tax return submission for all trusts
Trustees should be reminded that the Commissioner’s annual notice mandates that all trusts must file a tax return within the designated trust return filing period. Compliance with this requirement is of utmost importance for all representative taxpayers (trustees) of trusts. The responsibility for ensuring compliance rests with the board of trustees, and lay-person trustees cannot rely solely on their accountants to fulfill their legal obligations to SARS.
Key changes to the Income Tax Return for Trusts (ITR12T) effective from 23rd June 2023
- Simplified return for passive trusts:
- A less complex return is introduced for passive trusts with limited trust-specific activities during the assessment year.
- This includes dormant trusts with no ongoing activity but may hold assets.
- The simplified return aims to streamline the reporting process for such trusts.
- Reporting distributions from other trusts:
- Additional questions are incorporated into the Income Tax Return Wizard to determine if the trust received vested amounts as a beneficiary of another trust.
- Trustees need to provide information on the number of trusts from which these distributions were received.
- Clear details per trust must be provided in the tax return and maintained in the trust’s financial records.
- Information on donors/funders of the trust:
- The Income Tax Return Wizard now includes questions to identify if certain amounts are deemed to have accrued to a donor/funder as per Section 7 during the assessment year.
- Donors or funders subject to Section 7 provisions must declare trust income and capital gains attributed to them.
- Proper trust administration and accounting systems are necessary to handle this complex calculation.
- Beneficial Ownership Declaration:
- Reporting of beneficial owners and individuals who may financially benefit from the trust’s proceeds is required.
- Tax practitioners and trustees must be aware that updated “beneficial ownership” information should also be provided to the Master continuously.
- SARS has access to the Master’s portal, so maintaining real-time information on all beneficial owners is crucial to avoid discrepancies.
- Mandatory supporting documents upload:
- All mandatory supporting documents, such as the trust instrument, annual financial statements, and resolutions/minutes of trustee meetings, must be uploaded and submitted with the trust tax return.
- The specific requirements vary based on the trust type.
- This new requirement emphasizes the need for an integrated trust administration system to ensure the accurate and timely submission of legally required documents.
- Relying on manual processes and third-party sources for these documents can be time-consuming, costly, and risky.
Filing deadlines for 2023
- For non-provisional taxpayer trusts, the filing period commences on 7th July and concludes on 24th October 2023.
- Provisional taxpayer trusts have a filing period starting from 7th July 2023 and ending on 24th January 2024.
Declaration of trust income by beneficiaries
- Beneficiaries of a trust are required to report any income vested in them by the trust during the assessment year in their individual income tax returns. It is important for this information to reconcile with the new IT3(t) forms that trustees must submit annually to SARS, detailing distributions made to beneficiaries. The submission of IT3(t) forms should precede the due date for trust tax returns. To ensure timely availability of this information, it is advisable to utilize a reliable trust administration system that provides real-time data shortly after the trust’s tax year-end, which typically occurs in February each year.
To register a new trust for income tax purposes and submit the required supporting documents, access SARS’s online platform available on their website at sars.gov.za. Navigate to the SARS Online Trust Registration link, where you can complete the registration process and upload the necessary documents.
This article has been reproduced by courtesy of TRUSTEEZE and SARS.
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